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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended 09/30/2023

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .
Commission file number 000-20557

THE ANDERSONS, INC.
(Exact name of the registrant as specified in its charter)

Ohio |  | 34-1562374
(State of incorporation or organization) |  | (I.R.S. Employer Identification No.)
1947 Briarfield Boulevard |  |
Maumee | Ohio |  | 43537
(Address of principal executive offices) |  | (Zip Code)

(419) 893-5050
(Telephone Number)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class: |  | Trading Symbol |  | Name of each exchange on which registered:
Common stock, $0.00 par value, $0.01 stated value |  | ANDE |  | The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ý | Accelerated filer | ☐
Non-accelerated filer | ☐ | Smaller reporting company | ☐
|  | Emerging growth company | ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ý
The registrant had 33,752,321 common shares outstanding at October 27, 2023.

Table of Contents
THE ANDERSONS, INC.
INDEX

| Page No.
PART I. FINANCIAL INFORMATION |
Item 1. Financial Statements (Unaudited) |
Condensed Consolidated Statements of Operations – Three and Nine months ended S eptember 30, 2023 and 2022 | 1
Condensed Consolidated Statements of Comprehensive Income – Three and Nine months ended September 30, 2023 and 2022 | 2
Condensed Consolidated Balance Sheets – September 30, 2023, December 31, 2022 and September 30, 2022 | 3
Condensed Consolidated Statements of Cash Flows – Nine months ended September 30, 2023 and 2022 | 4
Condensed Consolidated Statements of Equity – Three and Nine months ended September 30, 2023 and 2022 | 5
Notes to Condensed Consolidated Financial Statements | 7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24
Item 3. Quantitative and Qualitative Disclosures about Market Risk | 35
Item 4. Controls and Procedures | 35
PART II. OTHER INFORMATION |
Item 1. Legal Proceedings | 36
Item 1A. Risk Factors | 36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 36
Item 5. Other Information | 36
Item 6. Exhibits | 37

Table of Contents
Part I. Financial Information
Item 1. Financial Statements
The Andersons, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share data)

| Three months ended September 30, |  | Nine months ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Sales and merchandising revenues | $ | 3,635,691 |  |  | $ | 4,219,325 |  |  | $ | 11,537,112 |  |  | $ | 12,647,896 |
Cost of sales and merchandising revenues | 3,477,990 |  |  | 4,055,560 |  |  | 11,009,463 |  |  | 12,133,755 |
Gross profit | 157,701 |  |  | 163,765 |  |  | 527,649 |  |  | 514,141 |
Operating, administrative and general expenses | 126,306 |  |  | 115,539 |  |  | 359,548 |  |  | 330,085 |
Asset impairment | — |  |  | — |  |  | 87,156 |  |  | — |
Interest expense, net | 8,188 |  |  | 14,982 |  |  | 38,766 |  |  | 42,762 |
Other income, net | 15,178 |  |  | 1,475 |  |  | 35,623 |  |  | 22,185 |
Income before income taxes from continuing operations | 38,385 |  |  | 34,719 |  |  | 77,802 |  |  | 163,479 |
Income tax provision from continuing operations | 7,862 |  |  | 9,839 |  |  | 23,710 |  |  | 29,695 |
Net income from continuing operations | 30,523 |  |  | 24,880 |  |  | 54,092 |  |  | 133,784 |
Income from discontinued operations, net of income taxes | — |  |  | 19,392 |  |  | — |  |  | 18,099 |
Net income | 30,523 |  |  | 44,272 |  |  | 54,092 |  |  | 151,883 |
Net income attributable to noncontrolling interests | 20,815 |  |  | 7,524 |  |  | 4,088 |  |  | 29,827 |
Net income attributable to The Andersons, Inc. | $ | 9,708 |  |  | $ | 36,748 |  |  | $ | 50,004 |  |  | $ | 122,056 |
Average number of shares outstanding - basic | 33,752 |  |  | 33,825 |  |  | 33,706 |  |  | 33,805 |
Average number of share outstanding - diluted | 34,270 |  |  | 34,407 |  |  | 34,266 |  |  | 34,469 |
Earnings per share attributable to The Andersons, Inc. common shareholders: |  |  |  |  |  |  |
Basic earnings: |  |  |  |  |  |  |
Continuing operations | $ | 0.29 |  |  | $ | 0.51 |  |  | $ | 1.48 |  |  | $ | 3.08 |
Discontinued operations | — |  |  | 0.57 |  |  | — |  |  | 0.54 |
| $ | 0.29 |  |  | $ | 1.08 |  |  | $ | 1.48 |  |  | $ | 3.62 |
Diluted earnings: |  |  |  |  |  |  |
Continuing operations | $ | 0.28 |  |  | $ | 0.50 |  |  | $ | 1.46 |  |  | $ | 3.02 |
Discontinued operations | — |  |  | 0.56 |  |  | — |  |  | 0.53 |
| $ | 0.28 |  |  | $ | 1.06 |  |  | $ | 1.46 |  |  | $ | 3.55 |

See Notes to Condensed Consolidated Financial Statements
The Andersons, Inc. | Q3 2023 Form 10-Q | 1

Table of Contents
The Andersons, Inc.
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands)

| Three months ended September 30, |  | Nine months ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Net income | $ | 30,523 |  |  | $ | 44,272 |  |  | $ | 54,092 |  |  | $ | 151,883 |
Other comprehensive income (loss), net of tax: |  |  |  |  |  |  |
Change in unrecognized actuarial loss and prior service cost | (276) |  |  | (131) |  |  | (653) |  |  | 227 |
Foreign currency translation adjustments | (2,600) |  |  | (9,828) |  |  | 836 |  |  | (15,409) |
Cash flow hedge activity | 5,973 |  |  | 10,719 |  |  | 7,912 |  |  | 29,838 |
Other comprehensive income | 3,097 |  |  | 760 |  |  | 8,095 |  |  | 14,656 |
Comprehensive income | 33,620 |  |  | 45,032 |  |  | 62,187 |  |  | 166,539 |
Comprehensive income attributable to the noncontrolling interests | 20,815 |  |  | 7,524 |  |  | 4,088 |  |  | 29,827 |
Comprehensive income attributable to The Andersons, Inc. | $ | 12,805 |  |  | $ | 37,508 |  |  | $ | 58,099 |  |  | $ | 136,712 |

See Notes to Condensed Consolidated Financial Statements
The Andersons, Inc. | Q3 2023 Form 10-Q | 2

Table of Contents
The Andersons, Inc.
Condensed Consolidated Balance Sheets (Unaudited)

(In thousands) | September 30, 2023 |  | December 31, 2022 |  | September 30, 2022
Assets |  |  |  |  |
Current assets: |  |  |  |  |
Cash and cash equivalents | $ | 418,055 |  |  | $ | 115,269 |  |  | $ | 140,771 |
Accounts receivable, net | 816,686 |  |  | 1,248,878 |  |  | 990,531 |
Inventories (Note 2) | 985,292 |  |  | 1,731,725 |  |  | 1,556,426 |
Commodity derivative assets – current (Note 5) | 239,595 |  |  | 295,588 |  |  | 502,097 |
Other current assets | 67,471 |  |  | 74,493 |  |  | 75,402 |
Total current assets | 2,527,099 |  |  | 3,465,953 |  |  | 3,265,227 |
Other assets: |  |  |  |  |
Goodwill | 128,542 |  |  | 129,342 |  |  | 129,342 |
Other intangible assets, net | 90,768 |  |  | 100,907 |  |  | 99,317 |
Right of use assets, net | 56,919 |  |  | 61,890 |  |  | 59,146 |
Other assets, net | 104,586 |  |  | 87,175 |  |  | 99,650 |
Total other assets | 380,815 |  |  | 379,314 |  |  | 387,455 |
Property, plant and equipment, net (Note 3) | 680,188 |  |  | 762,729 |  |  | 765,939 |
Total assets | $ | 3,588,102 |  |  | $ | 4,607,996 |  |  | $ | 4,418,621 |
Liabilities and equity |  |  |  |  |
Current liabilities: |  |  |  |  |
Short-term debt | $ | 14,138 |  |  | $ | 272,575 |  |  | $ | 652,947 |
Trade and other payables | 822,153 |  |  | 1,423,633 |  |  | 930,027 |
Customer prepayments and deferred revenue | 211,867 |  |  | 370,524 |  |  | 258,828 |
Commodity derivative liabilities – current (Note 5) | 142,511 |  |  | 98,519 |  |  | 137,168 |
Current maturities of long-term debt | 27,535 |  |  | 110,155 |  |  | 112,029 |
Accrued expenses and other current liabilities | 189,430 |  |  | 245,916 |  |  | 229,508 |
Total current liabilities | 1,407,634 |  |  | 2,521,322 |  |  | 2,320,507 |
Long-term lease liabilities | 32,883 |  |  | 37,147 |  |  | 34,779 |
Long-term debt, less current maturities | 569,730 |  |  | 492,518 |  |  | 497,988 |
Deferred income taxes | 58,217 |  |  | 64,080 |  |  | 59,079 |
Other long-term liabilities | 70,552 |  |  | 63,160 |  |  | 79,727 |
Total liabilities | 2,139,016 |  |  | 3,178,227 |  |  | 2,992,080 |
Commitments and contingencies (Note 13) |  |  |  |  |
Shareholders’ equity: |  |  |  |  |
Common shares, without par value (63,000 shares authorized and 34,064 shares issued for all periods presented) | 142 |  |  | 142 |  |  | 142 |
Preferred shares, without par value (1,000 shares authorized; none issued) | — |  |  | — |  |  | — |
Additional paid-in-capital | 383,724 |  |  | 385,248 |  |  | 381,728 |
Treasury shares, at cost (270, 446 and 293 shares at 9/30/2023, 12/31/2022 and 9/30/2022, respectively) | (10,266) |  |  | (15,043) |  |  | (9,991) |
Accumulated other comprehensive income | 28,579 |  |  | 20,484 |  |  | 15,850 |
Retained earnings | 838,556 |  |  | 807,770 |  |  | 806,186 |
Total shareholders’ equity of The Andersons, Inc. | 1,240,735 |  |  | 1,198,601 |  |  | 1,193,915 |
Noncontrolling interests | 208,351 |  |  | 231,168 |  |  | 232,626 |
Total equity | 1,449,086 |  |  | 1,429,769 |  |  | 1,426,541 |
Total liabilities and equity | $ | 3,588,102 |  |  | $ | 4,607,996 |  |  | $ | 4,418,621 |

See Notes to Condensed Consolidated Financial Statements
The Andersons, Inc. | Q3 2023 Form 10-Q | 3

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The Andersons, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)

| Nine months ended September 30,
| 2023 |  | 2022
Operating Activities |  |  |
Net income from continuing operations | $ | 54,092 |  |  | $ | 133,784 |
Income from discontinued operations, net of income taxes | — |  |  | 18,099 |
Net income | 54,092 |  |  | 151,883 |
Adjustments to reconcile net income to cash provided by (used in) operating activities: |  |  |
Depreciation and amortization | 93,800 |  |  | 101,266 |
Gain on sale of business from discontinued operations | — |  |  | (27,091) |
Asset impairment | 87,156 |  |  | — |
Other | 1,347 |  |  | (1,296) |
Changes in operating assets and liabilities: |  |  |
Accounts receivable | 406,263 |  |  | (140,866) |
Inventories | 748,118 |  |  | 236,854 |
Commodity derivatives | 99,479 |  |  | (104,901) |
Other current and non-current assets | 2,048 |  |  | 2,000 |
Payables and other current and non-current liabilities | (796,216) |  |  | (371,219) |
Net cash provided by (used in) operating activities | 696,087 |  |  | (153,370) |
Investing Activities |  |  |
Acquisition of businesses, net of cash acquired | (24,385) |  |  | — |
Purchases of property, plant and equipment and capitalized software | (108,718) |  |  | (72,247) |
Proceeds from sale of assets | 3,082 |  |  | 4,810 |
Proceeds from sale of business from continuing operations | 10,318 |  |  | 5,171 |
Proceeds from sale of business from discontinued operations | — |  |  | 56,302 |
Purchases of Rail assets | — |  |  | (27,464) |
Proceeds from sale of Rail assets | 2,871 |  |  | 36,706 |
Other | (431) |  |  | (359) |
Net cash (used in) provided by investing activities | (117,263) |  |  | 2,919 |
Financing Activities |  |  |
Net receipts (payments) under short-term lines of credit | (261,152) |  |  | 361,318 |
Proceeds from issuance of short-term debt | — |  |  | 350,000 |
Payments of short-term debt | — |  |  | (550,000) |
Proceeds from issuance of long-term debt | 100,000 |  |  | — |
Payments of long-term debt | (42,734) |  |  | (22,585) |
Contributions from noncontrolling interest owner | — |  |  | 2,450 |
Distributions to noncontrolling interest owner | (44,304) |  |  | (34,930) |
Payments of debt issuance costs | (769) |  |  | (7,802) |
Dividends paid | (18,771) |  |  | (18,262) |
Proceeds from exercises of stock options | — |  |  | 5,024 |
Common stock repurchased | (1,747) |  |  | (6,769) |
Value of shares withheld for taxes | (6,627) |  |  | (3,349) |
Other | 258 |  |  | 394 |
Net cash (used in) provided by financing activities | (275,846) |  |  | 75,489 |
Effect of exchange rates on cash and cash equivalents | (192) |  |  | (711) |
Increase (decrease) in cash and cash equivalents | 302,786 |  |  | (75,673) |
Cash and cash equivalents at beginning of period | 115,269 |  |  | 216,444 |
Cash and cash equivalents at end of period | $ | 418,055 |  |  | $ | 140,771 |

See Notes to Condensed Consolidated Financial Statements
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The Andersons, Inc.
Condensed Consolidated Statements of Equity (Unaudited)
(In thousands, except per share data)

| Three Months Ended
| Common Shares |  | Additional Paid-in Capital |  | Treasury Shares |  | Accumulated Other Comprehensive Income |  | Retained Earnings |  | Noncontrolling Interests |  | Total
Balance at June 30, 2022 | $ | 142 |  |  | $ | 378,740 |  |  | $ | (2,313) |  |  | $ | 15,090 |  |  | $ | 775,495 |  |  | $ | 250,052 |  |  | $ | 1,417,206 |
Net income |  |  |  |  |  |  |  |  | 36,748 |  |  | 7,524 |  |  | 44,272 |
Other comprehensive income |  |  |  |  |  |  | 1,198 |  |  |  |  |  |  | 1,198 |
Amounts reclassified from accumulated other comprehensive income |  |  |  |  |  |  | (438) |  |  |  |  |  |  | (438) |
Distributions to noncontrolling interests |  |  |  |  |  |  |  |  |  |  | (24,950) |  |  | (24,950) |
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (0 shares) |  |  | 2,988 |  |  | 23 |  |  |  |  |  |  |  |  | 3,011 |
Purchase of treasury shares (232 shares) |  |  |  |  | (7,701) |  |  |  |  |  |  |  |  | (7,701) |
Dividends declared ($0.18 per common share) |  |  |  |  |  |  |  |  | (6,057) |  |  |  |  | (6,057) |
Restricted share award dividend equivalents |  |  |  |  |  |  |  |  |  |  |  |  | — |
Balance at September 30, 2022 | $ | 142 |  |  | $ | 381,728 |  |  | $ | (9,991) |  |  | $ | 15,850 |  |  | $ | 806,186 |  |  | $ | 232,626 |  |  | $ | 1,426,541 |
Balance at June 30, 2023 | $ | 142 |  |  | $ | 380,376 |  |  | $ | (10,270) |  |  | $ | 25,482 |  |  | $ | 835,256 |  |  | $ | 207,496 |  |  | $ | 1,438,482 |
Net income |  |  |  |  |  |  |  |  | 9,708 |  |  | 20,815 |  |  | 30,523 |
Other comprehensive income |  |  |  |  |  |  | 6,060 |  |  |  |  |  |  | 6,060 |
Amounts reclassified from accumulated other comprehensive income |  |  |  |  |  |  | (2,963) |  |  |  |  |  |  | (2,963) |
Distributions to noncontrolling interests |  |  |  |  |  |  |  |  |  |  | (19,960) |  |  | (19,960) |
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (0 shares) |  |  | 3,348 |  |  | 4 |  |  |  |  |  |  |  |  | 3,352 |
Dividends declared ($0.185 per common share) |  |  |  |  |  |  |  |  | (6,243) |  |  |  |  | (6,243) |
Restricted share award dividend equivalents |  |  |  |  |  |  |  |  | (165) |  |  |  |  | (165) |
Balance at September 30, 2023 | $ | 142 |  |  | $ | 383,724 |  |  | $ | (10,266) |  |  | $ | 28,579 |  |  | $ | 838,556 |  |  | $ | 208,351 |  |  | $ | 1,449,086 |

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| Nine Months Ended
| Common Shares |  | Additional Paid-in Capital |  | Treasury Shares |  | Accumulated Other Comprehensive Income |  | Retained Earnings |  | Noncontrolling Interests |  | Total
Balance at December 31, 2021 | $ | 140 |  |  | $ | 368,595 |  |  | $ | (263) |  |  | $ | 1,194 |  |  | $ | 702,759 |  |  | $ | 235,279 |  |  | $ | 1,307,704 |
Net income |  |  |  |  |  |  |  |  | 122,056 |  |  | 29,827 |  |  | 151,883 |
Other comprehensive income |  |  |  |  |  |  | 12,919 |  |  |  |  |  |  | 12,919 |
Amounts reclassified from Accumulated other comprehensive income |  |  |  |  |  |  | 1,737 |  |  |  |  |  |  | 1,737 |
Cash received from noncontrolling interests, net |  |  |  |  |  |  |  |  |  |  | 2,450 |  |  | 2,450 |
Distributions to noncontrolling interests |  |  |  |  |  |  |  |  |  |  | (34,930) |  |  | (34,930) |
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (51 shares) | 2 |  | 13,079 |  |  | (2,362) |  |  |  |  |  |  |  |  | 10,719 |
Purchase of treasury shares (232 shares) |  |  |  |  | (7,701) |  |  |  |  |  |  |  |  | (7,701) |
Dividends declared ($0.54 per common share) |  |  |  |  |  |  |  |  | (18,240) |  |  |  |  | (18,240) |
Restricted share award dividend equivalents |  |  | 54 |  |  | 335 |  |  |  |  | (389) |  |  |  |  | — |
Balance at September 30, 2022 | $ | 142 |  |  | $ | 381,728 |  |  | $ | (9,991) |  |  | $ | 15,850 |  |  | $ | 806,186 |  |  | $ | 232,626 |  |  | $ | 1,426,541 |
Balance at December 31, 2022 | $ | 142 |  |  | $ | 385,248 |  |  | $ | (15,043) |  |  | $ | 20,484 |  |  | $ | 807,770 |  |  | $ | 231,168 |  |  | $ | 1,429,769 |
Net income |  |  |  |  |  |  |  |  | 50,004 |  |  | 4,088 |  |  | 54,092 |
Other comprehensive income |  |  |  |  |  |  | 16,133 |  |  |  |  |  |  | 16,133 |
Amounts reclassified from Accumulated other comprehensive income |  |  |  |  |  |  | (8,038) |  |  |  |  |  |  | (8,038) |
Distributions to noncontrolling interests |  |  |  |  |  |  |  |  |  |  | (44,304) |  |  | (44,304) |
Deconsolidation of joint venture |  |  |  |  |  |  |  |  |  |  | 17,399 |  |  | 17,399 |
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (222 shares) |  |  | (2,146) |  |  | 6,359 |  |  |  |  |  |  |  |  | 4,213 |
Purchase of treasury shares (51 shares) |  |  |  |  | (1,747) |  |  |  |  |  |  |  |  | (1,747) |
Dividends declared ($0.555 per common share) |  |  |  |  |  |  |  |  | (18,728) |  |  |  |  | (18,728) |
Restricted share award dividend equivalents |  |  | 622 |  |  | 165 |  |  |  |  | (490) |  |  |  |  | 297 |
Balance at September 30, 2023 | $ | 142 |  |  | $ | 383,724 |  |  | $ | (10,266) |  |  | $ | 28,579 |  |  | $ | 838,556 |  |  | $ | 208,351 |  |  | $ | 1,449,086 |

See Notes to Condensed Consolidated Financial Statements
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The Andersons, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Basis of Presentation and Consolidation
These Condensed Consolidated Financial Statements include the accounts of The Andersons, Inc. and its wholly owned and controlled subsidiaries (the “Company”). Controlled subsidiaries include majority-owned subsidiaries and variable interest entities (“VIEs”) of which the Company is the primary beneficiary. As discussed further in Note 15, ELEMENT, LLC ("ELEMENT"), a joint venture ethanol plant within the Renewables segment, was deconsolidated from the Company's Condensed Consolidated Financial Statements in the second quarter. The Andersons Marathon Holdings LLC ("TAMH") is the Company’s only remaining VIE. The portion of these entities that is not owned by the Company is presented as noncontrolling interests. All intercompany accounts and transactions are eliminated in consolidation.
Investments in unconsolidated entities in which the Company has significant influence, but not control, are accounted for using the equity method of accounting.
During the third quarter of 2021, substantially all of the assets and liabilities of the Rail segment were classified as held-for-sale in the accompanying Condensed Consolidated Balance Sheets as the Company executed a definitive agreement to sell the Rail Leasing business and announced its intent to sell the remaining Rail Repair business, which was subsequently sold in 2022. These transactions effectively constitute the entirety of what has historically been included in the Rail reportable segment. Therefore, the associated operating results, net of income tax, have been classified as discontinued operations in the accompanying Condensed Consolidated Statements of Operations for all periods presented. Throughout this Quarterly Report on Form 10-Q, with the exception of the Condensed Consolidated Statements of Cash Flows, Condensed Consolidated Statements of Equity and unless otherwise indicated, amounts and activity are presented on a continuing operations basis.
In the opinion of management, all adjustments consisting of normal and recurring items considered necessary for the fair presentation of the results of operations, financial position, and cash flows for the periods indicated have been made. The results in these Condensed Consolidated Financial Statements are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023. An unaudited Condensed Consolidated Balance Sheet as of September 30, 2022 has been included as the Company operates in several seasonal industries.
The Condensed Consolidated Balance Sheet data at December 31, 2022 was derived from the audited Consolidated Financial Statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in The Andersons, Inc. Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).
2. Inventories
Major classes of inventories are presented below. Readily Marketable Inventories ("RMI") are agricultural commodity inventories such as corn, soybeans, wheat, and ethanol co-products, among others, carried at net realizable value which approximates fair value based on their commodity characteristics, widely available market information, and pricing mechanisms. The net realizable value of RMI is calculated as the fair value (spot price of the commodity in an exchange), less cost of disposal and transportation based on the local market. All other inventories are held at lower of cost or net realizable value.

(in thousands) | September 30, 2023 |  | December 31, 2022 |  | September 30, 2022
Grain and other agricultural products (a) | $ | 718,290 |  |  | $ | 1,326,531 |  |  | $ | 1,198,790 |
Energy inventories (a) | 18,939 |  |  | 21,084 |  |  | 25,797 |
Ethanol and co-products (a) | 94,375 |  |  | 156,341 |  |  | 117,310 |
Plant nutrients and cob products | 153,688 |  |  | 227,769 |  |  | 214,529 |
Total inventories | $ | 985,292 |  |  | $ | 1,731,725 |  |  | $ | 1,556,426 |

(a) Includes RMI of $708.2 million, $1,308.8 million and $1,167.0 million at September 30, 2023, December 31, 2022 and September 30, 2022, respectively.
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3. Property, Plant and Equipment
The components of Property, plant and equipment, net are as follows:

(in thousands) | September 30, 2023 |  | December 31, 2022 |  | September 30, 2022
Land | $ | 30,872 |  |  | $ | 38,689 |  |  | $ | 38,508 |
Land improvements and leasehold improvements | 79,829 |  |  | 92,084 |  |  | 93,026 |
Buildings and storage facilities | 360,234 |  |  | 364,721 |  |  | 366,453 |
Machinery and equipment | 916,552 |  |  | 980,159 |  |  | 956,471 |
Construction in progress | 44,420 |  |  | 41,429 |  |  | 40,599 |
| 1,431,907 |  |  | 1,517,082 |  |  | 1,495,057 |
Less: accumulated depreciation | 751,719 |  |  | 754,353 |  |  | 729,118 |
Property, plant and equipment, net | $ | 680,188 |  |  | $ | 762,729 |  |  | $ | 765,939 |

Depreciation expense on property, plant, and equipment used in continuing operations was $24.9 million and $27.3 million for three months ended September 30, 2023 and 2022, respectively. Additionally, depreciation expense on property, plant and equipment used in continuing operations was $75.5 million and $83.2 million for the nine months ended September 30, 2023 and 2022, respectively.
In the first quarter of 2023, the Company recorded a $87.2 million impairment charge related to ELEMENT. The plant faced operational and market-based challenges which were exacerbated by a shift in the California Low Carbon Fuel Standard credit markets and high western corn basis. At the time of the impairment, the Company owned 51% of ELEMENT and was a consolidated entity, as such, 49% of the impairment charge was represented in Net income (loss) attributable to noncontrolling interests in the Company's Condensed Consolidated Statements of Operations.
4. Debt
On April 3, 2023, the Company entered into a $100 million 8-year term loan with approximately half of the proceeds used to repay current maturities of long-term debt. The remainder of the proceeds were used to pay down a portion of outstanding line of credit borrowings. Payment of principal and interest is made on a quarterly basis. The loan bears interest at variable rates.
On April 18, 2023, ELEMENT was placed into receivership. As the receiver took control of ELEMENT, under the VIE consolidation model, the Company was deemed to have lost control of the entity and therefore deconsolidated ELEMENT from its Condensed Consolidated Financial Statements. As a result of the deconsolidation, the $62.8 million of non-recourse debt associated with ELEMENT was removed from Current maturities of long-term debt in the second quarter of 2023.
The total borrowing capacity of the Company's lines of credit at September 30, 2023, was $1,858.5 million, of which, the Company had a total of $1,841.4 million available for borrowing. The Company's borrowing capacity is reduced by a combination of outstanding borrowings and letters of credit.
As of September 30, 2023, December 31, 2022 and September 30, 2022, the estimated fair value of long-term debt, including the current portion, was $585.2 million, $595.7 million and $602.2 million, respectively. The Company estimates the fair value of its long-term debt based upon the Company’s credit standing and current interest rates offered to the Company on similar bonds and rates currently available to the Company for long-term borrowings with similar terms and remaining maturities.
The Company is in compliance with all financial covenants as of September 30, 2023.
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5. Derivatives
The Company’s operating results are affected by changes to commodity prices. The Trade and Renewables businesses have established “unhedged” futures position limits (the amount of a commodity, either owned or contracted for, that does not have an offsetting derivative contract). To reduce the exposure to market price risk on commodities owned and forward purchase and sale contracts, the Company enters into exchange traded commodity futures and options contracts and over-the-counter forward and option contracts with various counterparties. These contracts are primarily traded via regulated commodity exchanges. The Company’s forward purchase and sales contracts are for physical delivery of the commodity in a future period. Contracts to purchase commodities from producers generally relate to the current or future crop years for delivery periods quoted by regulated commodity exchanges. Most contracts for the sale of commodities to processors or other commercial consumers generally do not extend beyond one year.
Most of these contracts meet the definition of derivatives. While the Company considers its commodity contracts to be effective economic hedges, the Company does not designate or account for its commodity contracts as hedges as defined under current accounting standards. The Company primarily accounts for its commodity derivatives at estimated fair value. The estimated fair value of the commodity derivative contracts that require the receipt or posting of cash collateral is recorded on a net basis (offset against cash collateral posted or received, also known as margin deposits) within commodity derivative assets or liabilities. Management determines fair value based on exchange-quoted prices and in the case of its forward purchase and sale contracts, estimated fair value is adjusted for differences in local markets and non-performance risk. For contracts for which physical delivery occurs, balance sheet classification is based on estimated delivery date. For futures, options and over-the-counter contracts in which physical delivery is not expected to occur but, rather, the contract is expected to be net settled, the Company classifies these contracts as current or noncurrent assets or liabilities, as appropriate, based on the Company’s expectations as to when such contracts will be settled.
Realized and unrealized gains and losses in the value of commodity contracts (whether due to changes in commodity prices, changes in performance or credit risk, or due to sale, maturity or extinguishment of the commodity contract) and commodity inventories are included in cost of sales and merchandising revenues.
Generally accepted accounting principles permit a party to a master netting arrangement to offset fair value amounts recognized for derivative instruments against the right to reclaim cash collateral or obligation to return cash collateral under the same master netting arrangement. The Company has master netting arrangements for its exchange traded futures and options contracts and certain over-the-counter contracts. When the Company enters into a future, option or an over-the-counter contract, an initial margin deposit may be required by the counterparty. The amount of the margin deposit varies by commodity. If the market price of a future, option or an over-the-counter contract moves in a direction that is adverse to the Company’s position, an additional margin deposit, called a maintenance margin, is required. The margin deposit assets and liabilities are included in short-term commodity derivative assets or liabilities, as appropriate, in the Condensed Consolidated Balance Sheets.
The following table presents a summary of the estimated fair value of the Company’s commodity derivative instruments that require cash collateral and the associated cash posted/received as collateral. The net asset or liability positions of these derivatives (net of their cash collateral) are determined on a counterparty-by-counterparty basis and are included within Condensed Consolidated Balance Sheets in Commodity derivative assets (liabilities) - current or if long-term in nature, Other assets, net or Other long-term liabilities:

(in thousands) | September 30, 2023 |  | December 31, 2022 |  | September 30, 2022
Cash collateral paid | $ | 16,121 |  |  | $ | 64,530 |  |  | $ | 152,603 |
Fair value of derivatives | 38,203 |  |  | (10,014) |  |  | (42,578) |
Net derivative asset position | $ | 54,324 |  |  | $ | 54,516 |  |  | $ | 110,025 |

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The following table presents, on a gross basis, current and non-current commodity derivative assets and liabilities:

| September 30, 2023
(in thousands) | Commodity Derivative Assets - Current |  | Commodity Derivative Assets - Noncurrent |  | Commodity Derivative Liabilities - Current |  | Commodity Derivative Liabilities - Noncurrent |  | Total
Commodity derivative assets | $ | 301,990 |  |  | $ | 4,730 |  |  | $ | 12,733 |  |  | $ | 101 |  |  | $ | 319,554 |
Commodity derivative liabilities | (78,516) |  |  | (396) |  |  | (155,244) |  |  | (1,669) |  |  | (235,825) |
Cash collateral paid | 16,121 |  |  | — |  |  | — |  |  | — |  |  | 16,121 |
Balance sheet line item totals | $ | 239,595 |  |  | $ | 4,334 |  |  | $ | (142,511) |  |  | $ | (1,568) |  |  | $ | 99,850 |

| December 31, 2022
(in thousands) | Commodity Derivative Assets - Current |  | Commodity Derivative Assets - Noncurrent |  | Commodity Derivative Liabilities - Current |  | Commodity Derivative Liabilities - Noncurrent |  | Total
Commodity derivative assets | $ | 325,762 |  |  | $ | 1,796 |  |  | $ | 18,426 |  |  | $ | 686 |  |  | $ | 346,670 |
Commodity derivative liabilities | (94,704) |  |  | (149) |  |  | (116,945) |  |  | (1,484) |  |  | (213,282) |
Cash collateral paid | 64,530 |  |  | — |  |  | — |  |  | — |  |  | 64,530 |
Balance sheet line item totals | $ | 295,588 |  |  | $ | 1,647 |  |  | $ | (98,519) |  |  | $ | (798) |  |  | $ | 197,918 |

| September 30, 2022
(in thousands) | Commodity Derivative Assets - Current |  | Commodity Derivative Assets - Noncurrent |  | Commodity Derivative Liabilities - Current |  | Commodity Derivative Liabilities - Noncurrent |  | Total
Commodity derivative assets | $ | 529,456 |  |  | $ | 7,743 |  |  | $ | 24,143 |  |  | $ | 1,488 |  |  | $ | 562,830 |
Commodity derivative liabilities | (179,962) |  |  | (1,008) |  |  | (161,311) |  |  | (5,985) |  |  | (348,266) |
Cash collateral paid | 152,603 |  |  | — |  |  | — |  |  | — |  |  | 152,603 |
Balance sheet line item totals | $ | 502,097 |  |  | $ | 6,735 |  |  | $ | (137,168) |  |  | $ | (4,497) |  |  | $ | 367,167 |

The net pretax gains and losses on commodity derivatives not designated as hedging instruments included in the Company’s Condensed Consolidated Statements of Operations and the line items in which they are located are as follows:

| Three months ended September 30, |  | Nine months ended September 30,
(in thousands) | 2023 |  | 2022 |  | 2023 |  | 2022
Gains (losses) on commodity derivatives included in Cost of sales and merchandising revenues | $ | (26,918) |  |  | $ | (169,478) |  |  | $ | (49,659) |  |  | $ | 94,708 |

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The Company's volumes of commodity derivative contracts outstanding (on a gross basis) are as follows:

| September 30, 2023
(in thousands) | Number of Bushels |  | Number of Gallons |  |  |  | Number of Tons
Non-exchange traded: |  |  |  |  |  |  |
Corn | 546,004 |  |  | — |  |  |  |  | — |
Soybeans | 66,884 |  |  | — |  |  |  |  | — |
Wheat | 114,195 |  |  | — |  |  |  |  | — |
Oats | 24,712 |  |  | — |  |  |  |  | — |
Ethanol | — |  |  | 217,092 |  |  |  |  | — |
Dried distillers grain | — |  |  | — |  |  |  |  | 669 |
Soybean meal | — |  |  | — |  |  |  |  | 686 |
Other | 9,734 |  |  | 26,632 |  |  |  |  | 2,295 |
Subtotal | 761,529 |  |  | 243,724 |  |  |  |  | 3,650 |
Exchange traded: |  |  |  |  |  |  |
Corn | 158,900 |  |  | — |  |  |  |  | — |
Soybeans | 36,135 |  |  | — |  |  |  |  | — |
Wheat | 106,068 |  |  | — |  |  |  |  | — |
Oats | 1,865 |  |  | — |  |  |  |  | — |
Ethanol | — |  |  | 121,002 |  |  |  |  | — |
Propane | — |  |  | 108,990 |  |  |  |  | — |
Other | — |  |  | 672 |  |  |  |  | 779 |
Subtotal | 302,968 |  |  | 230,664 |  |  |  |  | 779 |
Total | 1,064,497 |  |  | 474,388 |  |  |  |  | 4,429 |

| December 31, 2022
(in thousands) | Number of Bushels |  | Number of Gallons |  |  |  | Number of Tons |  |
Non-exchange traded: |  |  |  |  |  |  |  |  |
Corn | 567,405 |  |  | — |  |  |  |  | — |  |  |
Soybeans | 56,608 |  |  | — |  |  |  |  | — |  |  |
Wheat | 102,716 |  |  | — |  |  |  |  | — |  |  |
Oats | 24,710 |  |  | — |  |  |  |  | — |  |  |
Ethanol | — |  |  | 178,935 |  |  |  |  | — |  |  |
Dried distillers grain | — |  |  | — |  |  |  |  | 449 |  |  |
Soybean meal | — |  |  | — |  |  |  |  | 570 |  |  |
Other | 10,054 |  |  | 44,547 |  |  |  |  | 2,029 |  |  |
Subtotal | 761,493 |  |  | 223,482 |  |  |  |  | 3,048 |  |  |
Exchange traded: |  |  |  |  |  |  |  |  |
Corn | 170,280 |  |  | — |  |  |  |  | — |  |  |
Soybeans | 46,380 |  |  | — |  |  |  |  | — |  |  |
Wheat | 111,567 |  |  | — |  |  |  |  | — |  |  |
Oats | 365 |  |  | — |  |  |  |  | — |  |  |
Ethanol | — |  |  | 94,206 |  |  |  |  | — |  |  |
Propane | — |  |  | 47,208 |  |  |  |  | — |  |  |
Other | — |  |  | 588 |  |  |  |  | 581 |  |  |
Subtotal | 328,592 |  |  | 142,002 |  |  |  |  | 581 |  |  |
Total | 1,090,085 |  |  | 365,484 |  |  |  |  | 3,629 |  |  |

The Andersons, Inc. | Q3 2023 Form 10-Q | 11

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| September 30, 2022
(in thousands) | Number of Bushels |  | Number of Gallons |  |  |  | Number of Tons
Non-exchange traded: |  |  |  |  |  |  |
Corn | 628,346 |  |  | — |  |  |  |  | — |
Soybeans | 120,182 |  |  | — |  |  |  |  | — |
Wheat | 60,877 |  |  | — |  |  |  |  | — |
Oats | 31,147 |  |  | — |  |  |  |  | — |
Ethanol | — |  |  | 196,660 |  |  |  |  | — |
Dried distillers grain | — |  |  | — |  |  |  |  | 391 |
Soybean meal | — |  |  | — |  |  |  |  | 483 |
Other | 9,449 |  |  | 30,747 |  |  |  |  | 3,448 |
Subtotal | 850,001 |  |  | 227,407 |  |  |  |  | 4,322 |
Exchange traded: |  |  |  |  |  |  |
Corn | 206,705 |  |  | — |  |  |  |  | — |
Soybeans | 68,520 |  |  | — |  |  |  |  | — |
Wheat | 87,580 |  |  | — |  |  |  |  | — |
Oats | 1,450 |  |  | — |  |  |  |  | — |
Ethanol | — |  |  | 91,770 |  |  |  |  | — |
Propane | — |  |  | 50,904 |  |  |  |  | — |
Other | 145 |  |  | 1,638 |  |  |  |  | 632 |
Subtotal | 364,400 |  |  | 144,312 |  |  |  |  | 632 |
Total | 1,214,401 |  |  | 371,719 |  |  |  |  | 4,954 |

Interest Rate and Other Derivatives
The Company’s objectives for using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
The gains or losses on the derivatives designated as hedging instruments are recorded in Other comprehensive income (loss) and subsequently reclassified into interest expense in the same periods during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.
The Company had recorded the following amounts for the fair value of the other derivatives:

(in thousands) | September 30, 2023 |  | December 31, 2022 |  | September 30, 2022
Derivatives not designated as hedging instruments |  |  |  |  |
Foreign currency contracts included in Other current assets (liabilities) | $ | (1,714) |  |  | $ | (3,124) |  |  | $ | (5,685) |
Derivatives designated as hedging instruments |  |  |  |  |
Interest rate contracts included in Other current assets | $ | 12,026 |  |  | $ | 8,759 |  |  | $ | 6,925 |
Interest rate contracts included in Other assets | 29,952 |  |  | 22,641 |  |  | 25,669 |

The Andersons, Inc. | Q3 2023 Form 10-Q | 12

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The recording of gains and losses on other derivatives and the financial statement line in which they are located are as follows:

| Three months ended September 30, |  | Nine months ended September 30,
(in thousands) | 2023 |  | 2022 |  | 2023 |  | 2022
Derivatives designated as hedging instruments |  |  |  |  |  |  |
Interest rate derivative gains included in Other comprehensive income | $ | 7,981 |  |  | $ | 14,282 |  |  | $ | 10,571 |  |  | $ | 39,746 |
Interest rate derivative gains (losses) included in Interest expense, net | 2,734 |  |  | 210 |  |  | 7,354 |  |  | (2,420) |

Outstanding interest rate derivatives, as of September 30, 2023, are as follows:

Interest Rate Hedging Instrument |  | Year Entered |  | Year of Maturity |  | Initial Notional Amount (in millions) |  | Description |  | Interest Rate
Long-term |  |  |  |  |  |  |  |  |  |
Swap |  | 2019 |  | 2025 |  | $ | 95.3 |  |  | Interest rate component of debt - accounted for as a hedge |  | 2.3%
Swap |  | 2019 |  | 2025 |  | $ | 47.7 |  |  | Interest rate component of debt - accounted for as a hedge |  | 2.4%
Swap |  | 2019 |  | 2025 |  | $ | 47.7 |  |  | Interest rate component of debt - accounted for as a hedge |  | 2.4%
Swap |  | 2020 |  | 2030 |  | $ | 50.0 |  |  | Interest rate component of debt - accounted for as a hedge |  | 0.0% to 0.8%
Swap |  | 2020 |  | 2030 |  | $ | 50.0 |  |  | Interest rate component of debt - accounted for as a hedge |  | 0.0% to 0.8%
Swap |  | 2022 |  | 2025 |  | $ | 20.0 |  |  | Interest rate component of debt - accounted for as a hedge |  | 2.6%
Swap |  | 2022 |  | 2029 |  | $ | 100.0 |  |  | Interest rate component of debt - accounted for as a hedge |  | 2.0%
Swap |  | 2022 |  | 2029 |  | $ | 50.0 |  |  | Interest rate component of debt - accounted for as a hedge |  | 2.4%
Swap |  | 2023 |  | 2024 |  | $ | 50.0 |  |  | Interest rate component of debt - accounted for as a hedge |  | 3.7%
Swap |  | 2023 |  | 2025 |  | $ | 50.0 |  |  | Interest rate component of debt - accounted for as a hedge |  | 3.7%
Swap |  | 2023 |  | 2031 |  | $ | 50.0 |  |  | Interest rate component of debt - accounted for as a hedge |  | 2.9%

6. Revenue
Many of the Company’s sales and merchandising revenues are generated from contracts that are outside the scope of ASC 606, Revenue from Contracts with Customers. Specifically, many of the Company's Trade and Renewables sales contracts are derivatives under ASC 815, Derivatives and Hedging. The breakdown of revenues between ASC 606 and ASC 815 is as follows:

| Three months ended September 30, |  | Nine months ended September 30,
(in thousands) | 2023 |  | 2022 |  | 2023 |  | 2022
Revenues under ASC 606 | $ | 688,111 |  |  | $ | 635,445 |  |  | $ | 2,402,358 |  |  | $ | 2,269,314 |
Revenues under ASC 815 | 2,947,580 |  |  | 3,583,880 |  |  | 9,134,754 |  |  | 10,378,582 |
Total revenues | $ | 3,635,691 |  |  | $ | 4,219,325 |  |  | $ | 11,537,112 |  |  | $ | 12,647,896 |

The remainder of this note applies only to those revenues that are accounted for under ASC 606.
The Andersons, Inc. | Q3 2023 Form 10-Q | 13

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Disaggregation of revenue
The following tables disaggregate revenues under ASC 606 by major product/service line:

| Three months ended September 30, 2023
(in thousands) | Trade |  | Renewables |  | Nutrient & Industrial |  | Total
Specialty nutrients | $ | — |  |  | $ | — |  |  | $ | 27,651 |  |  | $ | 27,651 |
Primary nutrients | — |  |  | — |  |  | 74,565 |  |  | 74,565 |
Products and co-products | 114,962 |  |  | 399,643 |  |  | — |  |  | 514,605 |
Propane | 29,572 |  |  | — |  |  | — |  |  | 29,572 |
Other | 13,455 |  |  | 1,946 |  |  | 26,317 |  |  | 41,718 |
Total | $ | 157,989 |  |  | $ | 401,589 |  |  | $ | 128,533 |  |  | $ | 688,111 |

| Three months ended September 30, 2022
(in thousands) | Trade |  | Renewables |  | Nutrient & Industrial |  | Total
Specialty nutrients | $ | — |  |  | $ | — |  |  | $ | 44,957 |  |  | $ | 44,957 |
Primary nutrients | — |  |  | — |  |  | 92,071 |  |  | 92,071 |
Products and co-products | 88,201 |  |  | 323,676 |  |  | — |  |  | 411,877 |
Propane | 47,867 |  |  | — |  |  | — |  |  | 47,867 |
Other | 10,179 |  |  | 1,646 |  |  | 26,848 |  |  | 38,673 |
Total | $ | 146,247 |  |  | $ | 325,322 |  |  | $ | 163,876 |  |  | $ | 635,445 |

| Nine months ended September 30, 2023
(in thousands) | Trade |  | Renewables |  | Nutrient & Industrial |  | Total
Specialty nutrients | $ | — |  |  | $ | — |  |  | $ | 195,982 |  |  | $ | 195,982 |
Primary nutrients | — |  |  | — |  |  | 454,416 |  |  | 454,416 |
Products and co-products | 318,217 |  |  | 1,162,898 |  |  | — |  |  | 1,481,115 |
Propane | 136,250 |  |  | — |  |  | — |  |  | 136,250 |
Other | 40,828 |  |  | 6,098 |  |  | 87,669 |  |  | 134,595 |
Total | $ | 495,295 |  |  | $ | 1,168,996 |  |  | $ | 738,067 |  |  | $ | 2,402,358 |

| Nine months ended September 30, 2022
(in thousands) | Trade |  | Renewables |  | Nutrient & Industrial |  | Total
Specialty nutrients | $ | — |  |  | $ | — |  |  | $ | 242,582 |  |  | $ | 242,582 |
Primary nutrients | — |  |  | — |  |  | 518,439 |  |  | 518,439 |
Products and co-products | 297,267 |  |  | 885,595 |  |  | — |  |  | 1,182,862 |
Propane | 203,459 |  |  | — |  |  | — |  |  | 203,459 |
Other | 34,554 |  |  | 4,239 |  |  | 83,179 |  |  | 121,972 |
Total | $ | 535,280 |  |  | $ | 889,834 |  |  | $ | 844,200 |  |  | $ | 2,269,314 |

Substantially all of the Company's revenues accounted for under ASC 606 during the periods presented in the preceding tables, are recorded at a point in time instead of over time.
The Andersons, Inc. | Q3 2023 Form 10-Q | 14

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Contract balances
The balances of the Company’s contract liabilities were $28.6 million and $55.4 million as of September 30, 2023 and December 31, 2022, respectively. The difference between the opening and closing balances of the Company’s contract liabilities is primarily a result of timing differences between the Company’s performance and the customer’s payment. The main driver of the contract liabilities balance are payments for primary and specialty nutrients received in advance of fulfilling our performance obligations under our customer contracts. Due to seasonality of this business, contract liabilities are built up through the first quarter in preparation for the spring application season. As expected, the revenue recognized in the second and third quarters satisfied the contract liabilities throughout the spring application season for our Nutrient & Industrial segment.
7. Income Taxes

| Three months ended September 30, |  | Nine months ended September 30,
(in thousands) | 2023 |  | 2022 |  | 2023 |  | 2022
Income before income taxes from continuing operations | $ | 38,385 |  |  | $ | 34,719 |  |  | $ | 77,802 |  |  | $ | 163,479 |
Income tax provision from continuing operations | 7,862 |  |  | 9,839 |  |  | 23,710 |  |  | 29,695 |
Effective tax rate from continuing operations | 20.5 | % |  | 28.3 | % |  | 30.5 | % |  | 18.2 | %

On a quarterly basis, the Company estimates the effective tax rate expected to be applicable for the full year and makes changes, if necessary, based on new information or events. The estimated annual effective tax rate is forecasted based on actual historical information and forward-looking estimates and is used to provide for income taxes in interim reporting periods. The Company also recognizes the tax impact of certain unusual or infrequently occurring items, such as the effects of changes in tax laws or rates and impacts from settlements with tax authorities, discretely in the quarter in which they occur.
The difference between the 20.5% effective tax rate and the U.S. federal statutory tax rate of 21.0% for the three months ended September 30, 2023 is primarily attributable to the tax impact of non-controlling interest offset by state and local income taxes, nondeductible compensation, and other discrete tax adjustments. The difference between the 30.5% effective tax rate and the U.S. federal statutory tax rate of 21.0% for the nine months ended September 30, 2023 is primarily attributable to the tax impact of non-controlling interest, state and local income taxes, nondeductible compensation and other discrete tax adjustments. Other discrete tax items include a net income tax benefit of $10.6 million recorded on a net loss before taxes of $88.8 million related to the current year operations, impairment charge, and gain on deconsolidation associated with ELEMENT.
The difference between the 28.3% effective tax rate and the U.S. federal statutory rate of 21.0% for the three months ended September 30, 2022 is due to the tax impact of non-controlling interest and state and local income taxes. The difference between the 18.2% effective tax rate and the U.S. federal statutory rate of 21.0% for the nine months ended September 30, 2022 is due to the tax impact of non-controlling interest as well as certain discrete derivatives and hedging activities offset by state and local income taxes and nondeductible compensation.
The Andersons, Inc. | Q3 2023 Form 10-Q | 15

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8. Accumulated Other Comprehensive Income
The following table summarizes the changes in accumulated other comprehensive income ("AOCI") attributable to the Company:

|  | Three months ended September 30, |  | Nine months ended September 30,
(in thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Currency Translation Adjustment |  |  |  |  |  |  |  |
Beginning balance |  | $ | (4,767) |  |  | $ | 50 |  |  | $ | (8,203) |  |  | $ | 5,631 |
Other comprehensive income (loss) before reclassifications |  | (2,600) |  |  | (9,828) |  |  | 836 |  |  | (15,409) |
Tax effect |  | — |  |  | — |  |  | — |  |  | — |
Other comprehensive income (loss), net of tax |  | (2,600) |  |  | (9,828) |  |  | 836 |  |  | (15,409) |
Ending balance |  | $ | (7,367) |  |  | $ | (9,778) |  |  | $ | (7,367) |  |  | $ | (9,778) |
Hedging Adjustment |  |  |  |  |  |  |  |
Beginning balance |  | $ | 25,485 |  |  | $ | 13,784 |  |  | $ | 23,546 |  |  | $ | (5,335) |
Other comprehensive income (loss) before reclassifications |  | 10,715 |  |  | 14,492 |  |  | 17,924 |  |  | 37,325 |
Amounts reclassified from AOCI (a) |  | (2,735) |  |  | (210) |  |  | (7,354) |  |  | 2,421 |
Tax effect |  | (2,007) |  |  | (3,563) |  |  | (2,658) |  |  | (9,908) |
Other comprehensive income (loss), net of tax |  | 5,973 |  |  | 10,719 |  |  | 7,912 |  |  | 29,838 |
Ending balance |  | $ | 31,458 |  |  | $ | 24,503 |  |  | $ | 31,458 |  |  | $ | 24,503 |
Pension and Other Postretirement Adjustment |  |  |  |  |  |  |  |
Beginning balance |  | $ | 4,506 |  |  | $ | 998 |  |  | $ | 4,883 |  |  | $ | 640 |
Other comprehensive income (loss) before reclassifications |  | (129) |  |  | 69 |  |  | (158) |  |  | 983 |
Amounts reclassified from AOCI (b) |  | (228) |  |  | (228) |  |  | (684) |  |  | (684) |
Tax effect |  | 81 |  |  | 28 |  |  | 189 |  |  | (72) |
Other comprehensive income (loss), net of tax |  | (276) |  |  | (131) |  |  | (653) |  |  | 227 |
Ending balance |  | $ | 4,230 |  |  | $ | 867 |  |  | $ | 4,230 |  |  | $ | 867 |
Investments in Convertible Preferred Securities Adjustment |  |  |  |  |  |  |  |
Beginning balance |  | $ | 258 |  |  | $ | 258 |  |  | $ | 258 |  |  | $ | 258 |
Other comprehensive income (loss), net of tax |  | — |  |  | — |  |  | — |  |  | — |
Ending balance |  | $ | 258 |  |  | $ | 258 |  |  | $ | 258 |  |  | $ | 258 |
Total AOCI Ending Balance |  | $ | 28,579 |  |  | $ | 15,850 |  |  | $ | 28,579 |  |  | $ | 15,850 |

(a) Amounts reclassified from gain (loss) on cash flow hedges are reclassified from AOCI to income when the hedged item affects earnings and is recognized in Interest expense, net. See Note 5 for additional information.
(b) This accumulated other comprehensive loss component is included in the computation of net periodic benefit cost recorded in Operating, administrative and general expenses.
The Andersons, Inc. | Q3 2023 Form 10-Q | 16

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9. Earnings Per Share

(in thousands, except per common share data) | Three months ended September 30, |  | Nine months ended September 30,
2023 |  | 2022 |  | 2023 |  | 2022
Numerator: |  |  |  |  |  |  |
Net income from continuing operations | $ | 30,523 |  |  | $ | 24,880 |  |  | $ | 54,092 |  |  | $ | 133,784 |
Net income attributable to noncontrolling interests (a) | 20,815 |  |  | 7,524 |  |  | 4,088 |  |  | 29,827 |
Net income attributable to The Andersons, Inc. common shareholders from continuing operations | $ | 9,708 |  |  | $ | 17,356 |  |  | $ | 50,004 |  |  | $ | 103,957 |
Income from discontinued operations, net of income taxes | $ | — |  |  | $ | 19,392 |  |  | $ | — |  |  | $ | 18,099 |
Denominator: |  |  |  |  |  |  |
Weighted average shares outstanding – basic | 33,752 |  |  | 33,825 |  |  | 33,706 |  |  | 33,805 |
Effect of dilutive awards | 518 |  |  | 582 |  |  | 560 |  |  | 664 |
Weighted average shares outstanding – diluted | 34,270 |  |  | 34,407 |  |  | 34,266 |  |  | 34,469 |
Earnings per share attributable to The Andersons, Inc. common shareholders: |  |  |  |  |  |  |
Basic earnings: |  |  |  |  |  |  |
Continuing operations | $ | 0.29 |  |  | $ | 0.51 |  |  | $ | 1.48 |  |  | $ | 3.08 |
Discontinued operations | — |  |  | 0.57 |  |  | — |  |  | 0.54 |
| $ | 0.29 |  |  | $ | 1.08 |  |  | $ | 1.48 |  |  | $ | 3.62 |
Diluted earnings: |  |  |  |  |  |  |
Continuing operations | $ | 0.28 |  |  | $ | 0.50 |  |  | $ | 1.46 |  |  | $ | 3.02 |
Discontinued operations | — |  |  | 0.56 |  |  | — |  |  | 0.53 |
| $ | 0.28 |  |  | $ | 1.06 |  |  | $ | 1.46 |  |  | $ | 3.55 |

(a) All net income attributable to noncontrolling interests is within continuing operations of the Company.
10. Fair Value Measurements
The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis:

(in thousands) | September 30, 2023
Assets (liabilities) | Level 1 |  | Level 2 |  | Level 3 |  | Total
Commodity derivatives, net (a) | $ | 54,324 |  |  | $ | 45,526 |  |  | $ | — |  |  | $ | 99,850 |
Provisionally priced contracts (b) | (80,657) |  |  | (24,460) |  |  | — |  |  | (105,117) |
Convertible preferred securities (c) | — |  |  | — |  |  | 20,628 |  |  | 20,628 |
Other assets and liabilities (d) | 2,331 |  |  | 41,978 |  |  | — |  |  | 44,309 |
Total | $ | (24,002) |  |  | $ | 63,044 |  |  | $ | 20,628 |  |  | $ | 59,670 |

(in thousands) | December 31, 2022
Assets (liabilities) | Level 1 |  | Level 2 |  | Level 3 |  | Total
Commodity derivatives, net (a) | $ | 54,516 |  |  | $ | 143,402 |  |  | $ | — |  |  | $ | 197,918 |
Provisionally priced contracts (b) | (20,960) |  |  | (115,377) |  |  | — |  |  | (136,337) |
Convertible preferred securities (c) | — |  |  | — |  |  | 16,278 |  |  | 16,278 |
Other assets and liabilities (d) | (209) |  |  | 31,400 |  |  | — |  |  | 31,191 |
Total | $ | 33,347 |  |  | $ | 59,425 |  |  | $ | 16,278 |  |  | $ | 109,050 |

The Andersons, Inc. | Q3 2023 Form 10-Q | 17

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(in thousands) | September 30, 2022
Assets (liabilities) | Level 1 |  | Level 2 |  | Level 3 |  | Total
Commodity derivatives, net (a) | $ | 110,025 |  |  | $ | 257,142 |  |  | $ | — |  |  | $ | 367,167 |
Provisionally priced contracts (b) | 19,685 |  |  | (41,188) |  |  | — |  |  | (21,503) |
Convertible preferred securities (c) | — |  |  | — |  |  | 16,946 |  |  | 16,946 |
Other assets and liabilities (d) | (3,037) |  |  | 32,594 |  |  | — |  |  | 29,557 |
Total | $ | 126,673 |  |  | $ | 248,548 |  |  | $ | 16,946 |  |  | $ | 392,167 |

(a)Includes associated cash posted/received as collateral.
(b)Included in "Provisionally priced contracts" are those instruments based only on underlying futures values (Level 1) and delayed price contracts (Level 2).
(c)Recorded in “Other assets, net” on the Company’s Condensed Consolidated Balance Sheets related to certain available for sale securities.
(d)Included in other assets and liabilities are assets held by the Company to fund deferred compensation plans and foreign exchange derivative contracts (Level 1), as well as interest rate derivatives (Level 2).
Level 1 commodity derivatives reflect the fair value of the exchanged-traded futures and options contracts that the Company holds, net of the cash collateral, that the Company has in its margin account.
The majority of the Company’s assets and liabilities measured at fair value are based on the market approach valuation technique. With the market approach, fair value is derived using prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
The Company’s net commodity derivatives primarily consist of futures or options contracts via regulated exchanges and contracts with producers or customers under which the future settlement date and bushels (or gallons in the case of ethanol contracts) of commodities to be delivered (primarily wheat, corn, soybeans and ethanol) are fixed and under which the price may or may not be fixed. Depending on the specifics of the individual contracts, the fair value is derived from the futures or options prices quoted on various exchanges for similar commodities and delivery dates as well as observable quotes for local basis adjustments (the difference, which is attributable to local market conditions, between the quoted futures price and the local cash price). Because “basis” for a particular commodity and location typically has multiple quoted prices from other agribusinesses in the same geographical vicinity and is used as a common pricing mechanism in the agribusiness industry, the Company has concluded that “basis” is typically a Level 2 fair value input for purposes of the fair value disclosure requirements related to our commodity derivatives, depending on the specific commodity. Although nonperformance risk, both of the Company and the counterparty, is present in each of these commodity contracts and is a component of the estimated fair values, based on the Company’s historical experience with its producers and customers and the Company’s knowledge of their businesses, the Company does not view nonperformance risk to be a significant input to fair value for these commodity contracts.
These fair value disclosures exclude RMI which consists of agricultural commodity inventories measured at net realizable value. The net realizable value used to measure the Company’s agricultural commodity inventories is the fair value (spot price of the commodity in an exchange), less cost of disposal and transportation based on the local market. This valuation would generally be considered Level 2. The amount of RMI is disclosed in Note 2. Changes in the net realizable value of commodity inventories are recognized as a component of cost of sales and merchandising revenues.
Provisionally priced contract liabilities are those for which the Company has taken ownership and possession of grain, but the final purchase price has not been established. In the case of payables where the unpriced portion of the contract is limited to the futures price of the underlying commodity or the Company has delivered provisionally priced grain and a subsequent payable or receivable is set up for any future changes in the grain price, quoted exchange prices are used and the liability is deemed to be Level 1 in the fair value hierarchy. For all other unpriced contracts which include variable futures and basis components, the amounts recorded for delayed price contracts are determined on the basis of local grain market prices at the balance sheet date and, as such, are deemed to be Level 2 in the fair value hierarchy.
The convertible preferred securities are interests in several early-stage enterprises that may be in various forms, such as convertible debt or preferred equity securities.
The Andersons, Inc. | Q3 2023 Form 10-Q | 18

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A reconciliation of beginning and ending balances for the Company’s fair value measurements using Level 3 inputs is as follows:

| Convertible Preferred Securities
(in thousands) | 2023 |  | 2022
Assets at January 1, | $ | 16,278 |  |  | $ | 11,618 |
Purchases of additional investments | — |  |  | 3,883 |
Gains included in Other income, net | 802 |  |  | 404 |
Proceeds from investments | (1,670) |  |  | — |
Assets at March 31, | $ | 15,410 |  |  | $ | 15,905 |
Purchases of additional investments | 235 |  |  | 772 |
Gains (losses) included in Other income, net | (221) |  |  | 126 |
Assets at June 30, | $ | 15,424 |  |  | $ | 16,803 |
Additional investments | 1,107 |  |  | — |
Gains included in Other income, net | 4,919 |  |  | 143 |
Reclassification to a receivable in Other assets, net | (822) |  |  | — |
Assets at September 30, | $ | 20,628 |  |  | $ | 16,946 |

The following tables summarize quantitative information about the Company's Level 3 fair value measurements:

| Quantitative Information about Recurring Level 3 Fair Value Measurements
| Fair Value as of |  |  |  |  |  |
(in thousands) | September 30, 2023 |  | December 31, 2022 |  | September 30, 2022 |  | Valuation Method |  | Unobservable Input |  | Weighted Average
Convertible preferred securities (a) | $ | 20,628 |  |  | $ | 16,278 |  |  | $ | 16,946 |  |  | Implied based on market prices |  | N/A |  | N/A

(a) The Company considers observable price changes and other additional market data available to estimate fair value, including additional capital raising, internal valuation models, progress towards key business milestones, and other relevant market data points.

| Quantitative Information about Non-Recurring Level 3 Fair Value Measurements
| Fair Value as of |  |  |  |  |  |
(in thousands) | September 30, 2023 |  | December 31, 2022 |  | September 30, 2022 |  | Valuation Method |  | Unobservable Input |  | Weighted Average
Grain Assets (a) | $ | — |  |  | $ | 9,000 |  |  | $ | — |  |  | Third party appraisal |  | Various |  | N/A

(a) The Company recognized impairment charges on a Nebraska grain asset. The fair value of the asset was determined using third-party appraisals. These measures are considered Level 3 inputs on a nonrecurring basis.
The fair value of the Company’s cash equivalents, accounts receivable and accounts payable approximate their carrying value as they are close to maturity.
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11. Related Parties
In the ordinary course of business, and on an arm's length basis, the Company will enter into related party transactions with the minority shareholder of the Company's Renewables operations and certain equity method investments that the Company holds, along with other related parties.
The following table sets forth the related party transactions entered into for the time periods presented:

| Three months ended September 30, |  | Nine months ended September 30,
(in thousands) | 2023 |  | 2022 |  | 2023 |  | 2022
Sales of products | $ | 98,062 |  |  | $ | 102,565 |  |  | $ | 270,112 |  |  | $ | 291,820 |
Purchases of products | 9,061 |  |  | 13,405 |  |  | 39,286 |  |  | 51,814 |

(in thousands) | September 30, 2023 |  | December 31, 2022 |  | September 30, 2022
Accounts receivable | $ | 13,706 |  |  | $ | 12,272 |  |  | $ | 12,016 |
Accounts payable | 4,697 |  |  | 7,070 |  |  | 4,226 |

12. Segment Information
The Company’s operations include three reportable business segments that are distinguished primarily on the basis of products and services offered as well as the structure of management. The Trade business includes commodity merchandising and the operation of terminal grain elevator facilities. The Renewables business produces ethanol and co-products through its four co-owned and fully consolidated ethanol production facilities as well as purchases and sells ethanol and ethanol co-products. The Nutrient & Industrial (formerly Plant Nutrient) business manufactures and distributes plant nutrient products such as agricultural inputs, primarily fertilizers and turf care products along with industrial products such as deicers, dust abatement solutions and corncob-based products. The segment was rebranded in 2023 to reflect the portfolio of market offerings in the segment. The Other category includes other corporate level costs not attributable to an operating segment and intercompany eliminations between the segments.
The segment information below includes the allocation of expenses shared by one or more operating segments. Although management believes such allocations are reasonable, the operating information does not necessarily reflect how such data might appear if the segments were operated as separate businesses. The Company does not have any customers who represent 10 percent or more of total revenues.

| Three months ended September 30, |  | Nine months ended September 30,
(in thousands) | 2023 |  | 2022 |  | 2023 |  | 2022
Revenues from external customers |  |  |  |  |  |  |
Trade | $ | 2,639,059 |  |  | $ | 3,240,526 |  |  | $ | 8,213,649 |  |  | $ | 9,422,974 |
Renewables | 868,099 |  |  | 814,923 |  |  | 2,585,396 |  |  | 2,380,721 |
Nutrient & Industrial | 128,533 |  |  | 163,876 |  |  | 738,067 |  |  | 844,201 |
Total | $ | 3,635,691 |  |  | $ | 4,219,325 |  |  | $ | 11,537,112 |  |  | $ | 12,647,896 |

| Three months ended September 30, |  | Nine months ended September 30,
(in thousands) | 2023 |  | 2022 |  | 2023 |  | 2022
Income (loss) before income taxes from continuing operations |  |  |  |  |  |  |
Trade | $ | 8,073 |  |  | $ | 40,658 |  |  | $ | 52,427 |  |  | $ | 67,993 |
Renewables (a) | 47,096 |  |  | 15,901 |  |  | 31,187 |  |  | 89,639 |
Nutrient & Industrial | (8,452) |  |  | (11,609) |  |  | 23,675 |  |  | 37,445 |
Other | (8,332) |  |  | (10,231) |  |  | (29,487) |  |  | (31,598) |
Total | $ | 38,385 |  |  | $ | 34,719 |  |  | $ | 77,802 |  |  | $ | 163,479 |

(a) Includes income attributable to noncontrolling interests of $20.8 million and $7.5 million for the three months ended September 30, 2023 and 2022, respectively, and $4.1 million and $29.8 million for the nine months ended September 30, 2023 and 2022, respectively.
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13. Commitments and Contingencies
Litigation activities
The Company is party to litigation, or threats thereof, both as defendant and plaintiff with some regularity, although individual cases that are material in size occur infrequently. As a defendant, the Company establishes reserves for claimed amounts that are considered probable and capable of estimation. If those cases are resolved for lesser amounts, the excess reserves are taken into income and, conversely, if those cases are resolved for larger than the amount the Company has accrued, the Company records additional expense. The Company believes it is unlikely that the results of its current legal proceedings for which it is the defendant, even if unfavorable, will be material. As a plaintiff, amounts that are collected can also result in sudden, non-recurring income.
Litigation results depend upon a variety of factors, including the availability of evidence, the credibility of witnesses, the performance of counsel, the state of the law, and the impressions of judges and jurors, any of which can be critical in importance, yet difficult, if not impossible, to predict. Consequently, cases currently pending, or future matters, may result in unexpected, and non-recurring losses, or income, from time to time. Finally, litigation results are often subject to judicial reconsideration, appeal and further negotiation by the parties, and as a result, the final impact of a particular judicial decision may be unknown for some time or may result in continued reserves to account for the potential of such post-verdict actions.
The estimated losses for outstanding claims that are considered reasonably possible are not material.
14. Other Income
The following table sets forth the items in Other income, net within the Condensed Consolidated Statements of Operations:

| Three months ended September 30, |  | Nine months ended September 30,
(in thousands) | 2023 |  | 2022 |  | 2023 |  | 2022
Gain on deconsolidation of joint venture | $ | — |  |  | $ | — |  |  | $ | 6,544 |  |  | $ | — |
Property insurance recoveries | — |  |  | — |  |  | 3,183 |  |  | 3,106 |
Interest income | 3,296 |  |  | 544 |  |  | 6,471 |  |  | 1,837 |
Patronage income | 951 |  |  | 29 |  |  | 3,046 |  |  | 2,428 |
Gain on sale of assets and businesses | 6,515 |  |  | — |  |  | 5,836 |  |  | 3,979 |
Biofuel Producer Program funds | 2,190 |  |  | — |  |  | 2,190 |  |  | 17,643 |
Equity earnings (losses) in affiliates | (1,375) |  |  | 681 |  |  | (1,606) |  |  | (5,597) |
Gain on investments | 4,798 |  |  | 91 |  |  | 5,144 |  |  | 91 |
Other | (1,197) |  |  | 130 |  |  | 4,815 |  |  | (1,302) |
Total | $ | 15,178 |  |  | $ | 1,475 |  |  | $ | 35,623 |  |  | $ | 22,185 |

Individually significant items included in the table above are:
Gain on deconsolidation of joint venture - On April 18, 2023, ELEMENT was placed into receivership. As the receiver took control of ELEMENT, under the VIE consolidation model, the Company was deemed to have lost control of the entity and therefore deconsolidated ELEMENT from its Condensed Consolidated Financial Statements. As a result of these activities, the Company recognized a gain on deconsolidation. See footnote 15 for additional information.
Property insurance recoveries - In 2023, property insurance recoveries consisted of proceeds of $1.5 million relating to a conveyor collapse at a Louisiana grain asset in the prior year and proceeds of $1.0 million relating to a fire at a Michigan grain asset in the prior year, the remaining proceeds consists of several individually insignificant amounts in the ordinary course of business. In 2022, property insurance recoveries consisted of approximately $3.0 million relating to a prior period incident at the Company’s port facility in Texas. The remaining proceeds consists of individually insignificant amounts in the ordinary course of business.
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Interest income - In 2023, the Company earned $5.0 million in interest income on cash and cash equivalents with an additional $1.5 million earned from an inventory financing program, the remaining interest income consists of several individually insignificant amounts in the ordinary course of business. In 2022, an inventory financing program earned $1.1 million, the remaining interest income consisted of individually insignificant amounts in the ordinary course of business.
Patronage income - As a part of the Company’s normal operations it relies heavily on short-term lines of credit in order to support working capital needs in addition to long-term debt presented on the balance sheet. As part of these programs the Company receives patronage income from its lenders.
Gain on sale of assets and businesses - In 2023, the vast majority of the gain was from the sale of a Nebraska grain facility of $5.6 million, with the remaining amounts consisting of several individually insignificant amounts in the ordinary course of business. In 2022, the gain on the sale of assets and businesses consisted of the Company’s remaining frac sand facilities in Oklahoma and Minnesota, of $4.0 million.
Biofuel Producer Program funds - The USDA as a part of the Biofuel Producer Program, created under the CARES Act, provided funding to support biofuel producers who faced unexpected market losses due to the COVID-19 pandemic. In 2023, the Company received proceeds of $2.2 million under this program, of which, $1.7 million was attributable to TAMH. In 2022, TAMH and ELEMENT received proceeds of $13.3 million and $4.3 million, respectively. Of these proceeds $8.7 million was attributable to the noncontrolling interest.
Equity earnings (losses) in affiliates - In 2023 and 2022, the Company recorded an impairment charge on equity method investments for $1.0 million and $4.5 million, respectively. The remaining activity consists of routine earnings and losses in equity method investments through the ordinary course of business.
Gain on investments - In 2023, the gain on investments consisted of a $4.8 million revaluation gain of an investment within the Company's corporate venture fund. The remaining gains consists of individually insignificant activity in the ordinary course of business.
15. ELEMENT
ELEMENT was structured as a limited liability company established for the primary purpose of producing ethanol and additional co-products such as distiller’s dried grain and corn oil. The facility located in Colwich, Kansas, was designed to produce 70 million gallons of ethanol per year and began operations in August 2019.
The Company holds 51% of the membership units and ICM Holdings, Inc. (“ICM”) owns the remaining 49% of the membership units. The Company acted as the manager of the facility, responsibilities which were assumed per the Management Services Agreement dated January 1, 2021. ELEMENT was concluded to be a variable interest entity (“VIE”) and consolidated within the Company’s Consolidated Financial Statements.
In early 2023, ELEMENT was unable to make its scheduled debt payments and was placed into default. The default led to an impairment triggering event, concluding in an $87.2 million impairment charge in the first quarter.
On April 18, 2023, ELEMENT was placed into receivership and was appointed a receiver, which took possession and control of the rights and interests of ELEMENT. With this appointment, while retaining its investment in ELEMENT, the Company ceased to have a controlling financial interest and was no longer deemed to be the primary beneficiary in the subsidiary. Accordingly, the Company deconsolidated ELEMENT at that time and began accounting for the subsidiary as an equity method investment which resulted in a pretax gain of $18.1 million. Additionally, the Company had a $9.6 million balance in raw material and fee receivables as well as $2.0 million in loans and interest due from ELEMENT that were previously eliminated in consolidation. Upon deconsolidation, the fair values of these receivables and loans from ELEMENT to the Company were ascertained to have no value and were fully reserved for resulting in a pretax loss of $11.6 million. The combination of this activity triggered by the ELEMENT deconsolidation resulted in a cumulative net pretax gain of $6.5 million which was recorded in Other income, net in the Condensed Consolidated Statements of Operations.
As of September 30, 2023, ELEMENT has continued to incur losses and there have been no payments on the outstanding receivables or loan mentioned previously. No equity method losses related to ELEMENT have been recorded since deconsolidation as the investment is in a negative position as of September 30, 2023.
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16. Goodwill
The changes in the carrying amount of goodwill by reportable segment for the nine months ended September 30, 2023 are as follows:

(in thousands) |  | Trade |  | Renewables |  | Nutrient & Industrial |  | Total
Balance at December 31, 2022 |  | $ | 119,867 |  |  | $ | 8,789 |  |  | $ | 686 |  |  | $ | 129,342 |
Divestitures (a) |  | (800) |  |  | — |  |  | — |  |  | (800) |
Balance at September 30, 2023 |  | $ | 119,067 |  |  | $ | 8,789 |  |  | $ | 686 |  |  | $ | 128,542 |

(a) Removal of allocated goodwill due to the sale of a Nebraska grain facility.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements which relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. Such factors include, but are not limited to, the effects of economic, weather and agricultural conditions, regulatory conditions, competition globally and in the markets the Company serves, geopolitical risk, fluctuations in cost and availability of commodities, the effectiveness of the Company's internal control over financial reporting and the unpredictability of existing and possible future litigation. However, it is not possible to predict or identify all such factors. The reader is urged to carefully consider these risks and others, including those risk factors listed under Item 1A of the 2022 Form 10-K. In some cases, the reader can identify forward-looking statements by terminology such as may, anticipates, believes, estimates, predicts, or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. These forward-looking statements relate only to events as of the date on which the statements are made and the Company undertakes no obligation, other than any imposed by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Although management believes that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Critical Accounting Policies and Estimates
Our critical accounting policies and critical accounting estimates, as described in our 2022 Form 10-K, have not materially changed through the third quarter of 2023.
Executive Overview
Our operations are organized, managed and classified into three reportable business segments: Trade, Renewables and Nutrient & Industrial. Each of these segments is generally based on the nature of products and services offered and aligns with the management structure.
The agricultural commodity-based business is one in which changes in selling prices generally move in relationship to changes in purchase prices. Therefore, increases or decreases in prices of the agricultural commodities that the business deals in will have a relatively equal impact on Sales and merchandising revenues and Cost of sales and merchandising revenues and a much less significant impact on Gross profit. As a result, changes in Sales and merchandising revenues between periods may not necessarily be indicative of the overall performance of the business and greater emphasis should be placed on changes in Gross profit.
Trade
The Trade segment’s third quarter operating results, although significantly lower than the prior year, nonetheless reflect solid underlying merchandising and grain asset fundamentals with aggregate results for most of the Trade product lines comparable to the strong third quarter of 2022. The asset-based business benefited from another solid Louisiana harvest and good space income after a large soft wheat harvest. Underlying merchandising fundamentals were also solid during the quarter but were negatively impacted by a currency loss in Egypt. While the company typically transacts in U.S. dollars, given the unusual currency liquidity challenges being experienced by customers in Egypt, the Company accepted a lower exchange rate for product that had been delivered and related receivables were revalued. In the premium ingredient businesses, volumes increased because of recent growth investments and acquisitions.
The majority of the Trade business remains focused on domestic grain flows and is less impacted by slowdowns in U.S. exports. With the large and ongoing U.S. harvest, our assets are well-positioned to accumulate, condition and store large quantities of grain. In this harvest, we expect drying income due to receipts of higher moisture corn. We are also receiving increased storage rates including variable storage rates in wheat. With increased domestic supply, the merchandising focus will continue to be on serving customers and opportunistic arbitrage.
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Agricultural inventories on hand were 91.4 million and 103.1 million bushels at September 30, 2023 and September 30, 2022, respectively. These bushels consist of inventory held at company-owned or leased facilities, transload inventory, in-transit inventory, and third-party held inventory. Total Trade storage space capacity at company-owned or leased facilities, including temporary pile storage, was approximately 169 million bushels at September 30, 2023, which slightly lower than the 185 million bushels of capacity in the prior year after the divestiture of certain grain assets in the current year.
Renewables
The Renewables segment's third quarter operating results were significantly higher than the prior year with the continued rally in ethanol crush margins, co-product values and lower operating costs from the prior year. Results from the merchandising businesses, including renewable diesel feedstocks, exceeded third quarter 2022 results by nearly $5 million. Three of the Company's four ethanol plants completed their semi-annual maintenance shutdowns in the third quarter and the fourth plant was completed shortly thereafter. Board crush values remain historically high into the fourth quarter. Corn harvest in the eastern corn belt ethanol production draw areas is somewhat delayed but not expected to impact ethanol operations.
Ethanol and related co-products volumes were as follows:

| Three months ended September 30, |  | Nine months ended September 30,
(in thousands) | 2023 |  | 2022 |  | 2023 |  | 2022
Ethanol (gallons shipped) | 190,368 |  |  | 184,845 |  |  | 575,567 |  |  | 576,392 |
E-85 (gallons shipped) | 11,786 |  |  | 11,624 |  |  | 30,867 |  |  | 28,938 |
Vegetable oils (pounds shipped) (a) | 343,619 |  |  | 207,509 |  |  | 908,976 |  |  | 556,073 |
DDG (tons shipped) (b) | 497 |  |  | 386 |  |  | 1,534 |  |  | 1,336 |

(a) Includes corn oil, soybean oil, and other fats, oils, and greases.
(b) DDG tons shipped converts wet tons to a dry ton equivalent amount.
Nutrient & Industrial
The Nutrient & Industrial segment's third quarter operating results improved from the prior year. During this seasonally slow period, the segment experienced an increase in margins that were partially offset by the decrease in volumes of 6% from the prior year. A specialty liquid plant was adversely impacted by a rail line outage which was the main contributing factor of the volume shortfall when compared to the prior year. Gross profit improved by $4 million and reflects these higher margins partially offset by the volume decrease from the same period of the prior year.
Storage capacity at our Ag Supply Chain and Specialty Liquids facilities, including leased storage, was approximately 457 thousand tons for dry nutrients and approximately 512 thousand tons for liquid nutrients at September 30, 2023, which is similar to the prior year.
Tons of product sold were as follows:

| Three months ended September 30, |  | Nine months ended September 30,
(in thousands) | 2023 |  | 2022 |  | 2023 |  | 2022
Ag Supply Chain | 209 |  |  | 195 |  |  | 1,053 |  |  | 904 |
Specialty Liquids | 59 |  |  | 84 |  |  | 282 |  |  | 322 |
Engineered Granules | 25 |  |  | 33 |  |  | 134 |  |  | 153 |
Total tons | 293 |  |  | 312 |  |  | 1,469 |  |  | 1,379 |

In the table above, Ag Supply Chain represents facilities principally engaged in the wholesale distribution and retail sale and application of primary agricultural nutrients such as bulk nitrogen, phosphorus, and potassium. Specialty Liquid locations produce and sell a variety of low-salt liquid starter fertilizers, micronutrients for agricultural use, and specialty products for use in various industrial processes. Engineered Granules include a variety of corncob-based products and facilities that primarily manufacture granulated dry products for use in specialty turf and agricultural applications. Prior year volumes have been reclassified for the three and nine months ended September 30, 2022, to conform with current year presentation as the product mix in certain facilities has evolved.
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Other
Our “Other” activities include corporate income and expense and cost for functions that provide support and services to the operating segments. The results include expenses and benefits not allocated to the operating segments and other elimination and consolidation adjustments.
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Operating Results
The following discussion focuses on the operating results as shown in the Condensed Consolidated Statements of Operations and includes a separate discussion by segment. Additional segment information is included herein in Note 12, Segment Information.
Comparison of the three months ended September 30, 2023, with the three months ended September 30, 2022, including a reconciliation of GAAP to non-GAAP measures:

| Three months ended September 30, 2023
(in thousands) | Trade |  | Renewables |  | Nutrient & Industrial |  | Other |  | Total
Sales and merchandising revenues | $ | 2,639,059 |  |  | $ | 868,099 |  |  | $ | 128,533 |  |  | $ | — |  |  | $ | 3,635,691 |
Cost of sales and merchandising revenues | 2,553,062 |  |  | 815,054 |  |  | 109,874 |  |  | — |  |  | 3,477,990 |
Gross profit | 85,997 |  |  | 53,045 |  |  | 18,659 |  |  | — |  |  | 157,701 |
Operating, administrative and general expenses | 79,247 |  |  | 8,332 |  |  | 26,233 |  |  | 12,494 |  |  | 126,306 |
Interest expense (income), net | 6,515 |  |  | 963 |  |  | 1,484 |  |  | (774) |  |  | 8,188 |
Other income, net | 7,838 |  |  | 3,346 |  |  | 606 |  |  | 3,388 |  |  | 15,178 |
Income (loss) before income taxes from continuing operations | $ | 8,073 |  |  | $ | 47,096 |  |  | $ | (8,452) |  |  | $ | (8,332) |  |  | $ | 38,385 |
Income before income taxes attributable to the noncontrolling interests | — |  |  | 20,815 |  |  | — |  |  | — |  |  | 20,815 |
Non-GAAP Income (loss) before income taxes attributable to the Company from continuing operations | $ | 8,073 |  |  | $ | 26,281 |  |  | $ | (8,452) |  |  | $ | (8,332) |  |  | $ | 17,570 |

| Three months ended September 30, 2022
(in thousands) | Trade |  | Renewables |  | Nutrient & Industrial |  | Other |  | Total
Sales and merchandising revenues | $ | 3,240,526 |  |  | $ | 814,923 |  |  | $ | 163,876 |  |  | $ | — |  |  | $ | 4,219,325 |
Cost of sales and merchandising revenues | 3,116,158 |  |  | 790,246 |  |  | 149,156 |  |  | — |  |  | 4,055,560 |
Gross profit | 124,368 |  |  | 24,677 |  |  | 14,720 |  |  | — |  |  | 163,765 |
Operating, administrative and general expenses | 73,347 |  |  | 7,053 |  |  | 25,427 |  |  | 9,712 |  |  | 115,539 |
Interest expense (income), net | 10,782 |  |  | 2,555 |  |  | 1,920 |  |  | (275) |  |  | 14,982 |
Other income (expense), net | 419 |  |  | 832 |  |  | 1,018 |  |  | (794) |  |  | 1,475 |
Income (loss) before income taxes from continuing operations | $ | 40,658 |  |  | $ | 15,901 |  |  | $ | (11,609) |  |  | $ | (10,231) |  |  | $ | 34,719 |
Income before income taxes attributable to the noncontrolling interests | — |  |  | 7,524 |  |  | — |  |  | — |  |  | 7,524 |
Non-GAAP Income (loss) before income taxes attributable to the Company from continuing operations | $ | 40,658 |  |  | $ | 8,377 |  |  | $ | (11,609) |  |  | $ | (10,231) |  |  | $ | 27,195 |

The Company uses Income (loss) before income taxes attributable to the Company from continuing operations, a non-GAAP financial measure as defined by the Securities and Exchange Commission, to evaluate the Company’s financial performance. This performance measure is not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures. Management believes that Income (loss) before income taxes attributable to the Company from continuing operations is a useful measure of the Company’s performance as it provides investors additional information about the Company's operations, allowing evaluation of underlying business performance and period-to-period comparability. This measure is not intended to replace or be an alternative to Income (loss) before income taxes from continuing operations, the most directly comparable measure reported under GAAP.
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Trade
Operating results for the Trade segment decreased by $32.6 million from the same period of the prior year. Sales and merchandising revenues decreased by $601.5 million and cost of sales and merchandising revenues decreased by $563.1 million that resulted in decreased gross profit of $38.4 million. The vast majority of the decrease in sales and merchandising revenues and cost of sales and merchandising revenues is attributable to sharp commodity price decreases from the prior year as the war in Ukraine created uncertainty around global supply which drove commodity prices higher in 2022. The main driver of the decrease in gross profit was from the international merchandising business in the Middle East and North Africa as results came in $31.6 million lower than the prior year from fewer merchandising opportunities and a currency loss, both related to the currency liquidity issues in Egypt. While the Company's practice is to transact in U.S. dollars, given the unusual currency liquidity issues facing our customers in Egypt, the Company accepted a lower exchange rate for product that had been delivered, which resulted in $19.2 million of foreign currency losses during the quarter.
Operating, administrative and general expenses increased by $5.9 million. The increase from the prior year is related to an additional $4.4 million of costs from new merchandising locations and $3.3 million of incremental insurance expenses, partially offset by lower incentive compensation.
Interest expense decreased by $4.3 million due to reduced short-term borrowings from lower commodity prices in addition to the business managing working capital usage in the higher interest rate environment in 2023.
Other income, net increased by $7.4 million from the same quarter of 2022. This increase was a result of a $5.6 million gain on the sale of a Nebraska grain asset in combination with $2.2 million of additional interest income related to increased cash on hand in the current year.
Renewables
Operating results for the Renewables segment increased by $17.9 million from the same period last year. Sales and merchandising revenues increased by $53.2 million and cost of sales and merchandising revenues increased by $24.8 million compared to prior year results. As a result, gross profit increased by $28.4 million compared to 2022 results. The increase in both sales and merchandising revenues and cost of sales and merchandising revenues can be attributed to increased third-party trading volumes mainly in renewable diesel feedstocks as the merchandising businesses continue to grow along with increased production from the TAMH plants. Partially offsetting the increase in both sales and merchandising revenues and cost of sales and merchandising revenues was the ELEMENT deconsolidation in the second quarter, as the current year has no activity and the prior year included approximately $60 million in each caption. The increase to gross profit in the current period results reflect a $22.7 million margin improvement at the ethanol plants, primarily from improved ethanol margins and decreased natural gas prices along with a $6.3 million improvement in the Company's ethanol and co-product merchandising businesses.
Operating, administrative and general expenses increased by $1.3 million from the prior year, of which, the majority was due to higher professional services fees.
Interest expense decreased by $1.6 million from the prior year due to lower working capital levels as a result of the ELEMENT deconsolidation.
Other income, net increased from the prior year by $2.5 million primarily due to $2.2 million in USDA Biofuel Producer Program proceeds received in the third quarter of 2023.
Nutrient & Industrial
Operating results for the Nutrient & Industrial segment increased by $3.2 million compared to the same period in the prior year. Sales and merchandising revenues decreased by $35.3 million and cost of sales and merchandising revenues decreased by $39.3 million resulting in an $3.9 million increase in gross profit. The decrease in sales and merchandising revenues and cost of sales and merchandising revenues was due to fertilizer prices decreasing approximately 40% from the prior year as volumes decreased modestly from same period of prior year. The increase in gross profit was mainly driven by a $4.6 million increase in margins, primarily on core agriculture products, offset by the small decrease in volumes.
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Other
Results for the quarter improved by $1.9 million compared to the same period in the prior year. The improvement in results was primarily driven by a $4.8 million revaluation gain of a cost method investment which was partially offset by higher benefits claims in the current year.
Income Taxes
For the three months ended September 30, 2023, the Company recorded income tax expense from continuing operations of $7.9 million. The Company's effective tax rate was 20.5% on income before taxes from continuing operations of $38.4 million. The difference between the 20.5% effective tax rate and the U.S. federal statutory tax rate of 21% is primarily attributable to the tax impact of non-controlling interest offset by state and local income taxes, nondeductible compensation and other discrete tax adjustments.
For the three months ended September 30, 2022, the Company recorded income tax expense from continuing operations of $9.8 million. The Company's effective tax rate was 28.3% on income from continuing operations of $34.7 million. The difference between the effective tax rate of 28.3% and the U.S. federal statutory tax rate of 21.0% is due to the tax impact of non-controlling interest and state and local taxes.
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Comparison of the nine months ended September 30, 2023, with the nine months ended September 30, 2022, including a reconciliation of GAAP to non-GAAP measures:

| Nine months ended September 30, 2023
(in thousands) | Trade |  | Renewables |  | Nutrient & Industrial |  | Other |  | Total
Sales and merchandising revenues | $ | 8,213,649 |  |  | $ | 2,585,396 |  |  | $ | 738,067 |  |  | $ | — |  |  | $ | 11,537,112 |
Cost of sales and merchandising revenues | 7,929,763 |  |  | 2,448,256 |  |  | 631,444 |  |  | — |  |  | 11,009,463 |
Gross profit | 283,886 |  |  | 137,140 |  |  | 106,623 |  |  | — |  |  | 527,649 |
Operating, administrative and general expenses | 220,373 |  |  | 24,804 |  |  | 79,251 |  |  | 35,120 |  |  | 359,548 |
Asset impairment | — |  |  | 87,156 |  |  | — |  |  | — |  |  | 87,156 |
Interest expense (income), net | 29,235 |  |  | 5,648 |  |  | 5,649 |  |  | (1,766) |  |  | 38,766 |
Other income, net | 18,149 |  |  | 11,655 |  |  | 1,952 |  |  | 3,867 |  |  | 35,623 |
Income (loss) before income taxes from continuing operations | $ | 52,427 |  |  | $ | 31,187 |  |  | $ | 23,675 |  |  | $ | (29,487) |  |  | $ | 77,802 |
Income before income taxes attributable to the noncontrolling interests | — |  |  | 4,088 |  |  | — |  |  | — |  |  | 4,088 |
Non-GAAP Income (loss) before income taxes attributable to the Company from continuing operations | $ | 52,427 |  |  | $ | 27,099 |  |  | $ | 23,675 |  |  | $ | (29,487) |  |  | $ | 73,714 |

| Nine months ended September 30, 2022
(in thousands) | Trade |  | Renewables |  | Nutrient & Industrial |  | Other |  | Total
Sales and merchandising revenues | $ | 9,422,974 |  |  | $ | 2,380,721 |  |  | $ | 844,201 |  |  | $ | — |  |  | $ | 12,647,896 |
Cost of sales and merchandising revenues | 9,128,993 |  |  | 2,280,965 |  |  | 723,797 |  |  | — |  |  | 12,133,755 |
Gross profit | 293,981 |  |  | 99,756 |  |  | 120,404 |  |  | — |  |  | 514,141 |
Operating, administrative and general expenses | 195,867 |  |  | 23,533 |  |  | 80,343 |  |  | 30,342 |  |  | 330,085 |
Interest expense (income), net | 32,269 |  |  | 6,334 |  |  | 5,304 |  |  | (1,145) |  |  | 42,762 |
Other income (expense), net | 2,148 |  |  | 19,750 |  |  | 2,688 |  |  | (2,401) |  |  | 22,185 |
Income (loss) before income taxes from continuing operations | $ | 67,993 |  |  | $ | 89,639 |  |  | $ | 37,445 |  |  | $ | (31,598) |  |  | $ | 163,479 |
Income before income taxes attributable to the noncontrolling interests | — |  |  | 29,827 |  |  | — |  |  | — |  |  | 29,827 |
Non-GAAP Income (loss) before income taxes attributable to the Company from continuing operations | $ | 67,993 |  |  | $ | 59,812 |  |  | $ | 37,445 |  |  | $ | (31,598) |  |  | $ | 133,652 |

The Company uses Income (loss) before income taxes attributable to the Company from continuing operations, a non-GAAP financial measure as defined by the Securities and Exchange Commission, to evaluate the Company’s financial performance. This performance measure is not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures. Management believes that Income (loss) before income taxes attributable to the Company from continuing operations is a useful measure of the Company’s performance as it provides investors additional information about the Company's operations, allowing evaluation of underlying business performance and period-to-period comparability. This measure is not intended to replace or be an alternative to Income (loss) before income taxes from continuing operations, the most directly comparable amounts reported under GAAP.
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Trade
Operating results for the Trade segment decreased by $15.6 million from the prior year. Sales and merchandising revenues decreased by $1,209.3 million and cost of sales and merchandising revenues decreased by $1,199.2 million for a decreased gross profit impact of $10.1 million. The vast majority of the decrease in sales and merchandising revenues and cost of sales and merchandising revenues is attributable to sharp commodity price decreases from the prior year as the war in Ukraine created uncertainty around global supply which drove commodity prices higher in 2022. The main cause of the $10.1 million decrease in gross profit was the merchandising business which is $16.6 million behind the same period of the prior year, with $35.8 million of the decline in the international merchandising business. This decrease is driven from less merchandising opportunities and the currency loss in the third quarter discussed above, both related to currency liquidity issues in Egypt. The asset-based business partially offset the gross profit shortfall in the segment by approximately $9.3 million as it recorded $16.1 million worth of inventory insurance recoveries, which were partially offset by lower elevation margins when compared to very strong prior year.
Operating, administrative and general expenses increased by $24.5 million from the same period of prior year. The main drivers of the increase include an additional $9.0 million of expense from new merchandising locations, $6.8 million in insurable clean-up costs in the current quarter related to a fire at a Michigan grain asset, $5.3 million of increased insurance expenses and $2.5 million in additional bad debt expense.
Interest expense decreased by $3.0 million due to reduced short-term borrowings from lower commodity prices in addition to the business managing working capital usage in the higher interest rate environment in 2023.
Other income, net increased by $16.0 million from the same period of 2022. The increase was due to favorable changes in foreign currency of $8.1 million, improved results from equity method investments of approximately $4.0 million and an additional $2.2 million of interest income in the current year.
Renewables
Operating results for Renewables decreased by $32.7 million from the same period of prior year. Sales and merchandising revenues increased by $204.7 million and cost of sales and merchandising revenues increased by $167.3 million compared to prior year. As a result, gross profit increased by $37.4 million to the prior year. The increase in both sales and merchandising revenues and cost of sales and merchandising revenues can be attributed to increased third-party trading volumes mainly in renewable diesel feedstocks as the merchandising businesses continue to grow. This increase was partially offset from the tapering down of operations at the ELEMENT facility and the ultimate deconsolidation of the entity that occurred in April of 2023 resulting in a reduction of both sales and merchandising revenues and cost of sales and merchandising revenues from the prior period of approximately $120 million. The gross profit associated with the ethanol plants was $46.6 million higher than the prior year from improved ethanol crush margins, lower energy costs and increased co-product values and volumes. This improvement at the plant level was partially offset by $7.1 million less unrealized mark-to-market gains when compared to the prior year.
An asset impairment charge of $87.2 million related to the ELEMENT joint venture in Colwich, Kansas was recorded in the current year. As ELEMENT was a consolidated subsidiary of the Company at the time, the entire impairment charge is represented in Asset impairment.
Interest expense decreased by $0.7 million from the prior year due to lower working capital levels as a result of the ELEMENT deconsolidation.
Other income, net decreased from the prior year by $8.1 million due to $17.6 million in proceeds received in the prior year as a part of the USDA Biofuel Producer Program that was enacted as a part of the CARES Act. In 2023, the Company recorded a $6.5 million gain on the deconsolidation of the ELEMENT joint venture and received an additional $2.2 million from the USDA Biofuel Producer Program.
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Nutrient & Industrial
Operating results for the Nutrient & Industrial segment decreased by $13.8 million when compared to the same period of prior year. Sales and merchandising revenues decreased $106.1 million and cost of sales and merchandising revenues decreased by $92.4 million resulting in decreased gross profit of $13.8 million. The decrease in sales and merchandising revenues and cost of sales and merchandising revenues was mainly due to the reset of record high fertilizer prices in the same period of 2022 that were a result of tight supply market exaggerated by the war in Ukraine. Fertilizer prices decreased approximately 43% from the prior year which were partially offset by an increase in tons sold of 6% when compared to the first nine months of the prior year. Gross profit decreased from the prior year by approximately $17.9 million from lower margins, partially offset by an increase of $4.2 million related to higher volumes in 2023.
Other
Other expenses decreased from the prior period by $2.1 million from a $4.8 million revaluation gain of a cost method investment that was partially offset by higher benefit claims in the current year.
Income Taxes
For the nine months ended September 30, 2023, the Company recorded an income tax expense from continuing operations of $23.7 million. The Company's effective tax rate was 30.5% on income before taxes from continuing operations of $77.8 million. The difference between the 30.5% effective tax rate and the U.S. federal statutory tax rate of 21.0% is primarily attributable to the tax impact of non-controlling interest, state and local income taxes, nondeductible compensation and other discrete tax adjustments. Other discrete tax items include a net income tax benefit of $10.6 million, recorded on a net loss before taxes of $88.8 million related to the current year operations, impairment charge, and gain on deconsolidation associated with ELEMENT.
For the nine months ended September 30, 2022, the Company recorded income tax expense from continuing operations of $29.7 million. The Company’s effective tax rate was 18.2% on income before income taxes from continuing operations of $163.5 million. The difference between the 18.2% effective tax rate and the U.S. federal statutory rate of 21.0% is due to the tax impact of non-controlling interest as well as certain discrete derivatives and hedging activities offset by state and local income taxes and nondeductible compensation.
The Company’s subsidiary partnership returns are under federal tax examination by the Internal Revenue Service (“IRS”) for the tax years 2015 through 2018, respectively. The Company’s subsidiary is under federal tax examination by the Mexican tax authorities for tax year 2015. The IRS and Mexican tax authorities’ examinations could potentially be resolved within the next 12 months. The resolution of these examinations could change our unrecognized tax benefits and favorably impact income tax expense by a range of $2.9 million to $8.1 million.
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Liquidity and Capital Resources
Working Capital
At September 30, 2023, the Company had working capital from continuing operations of $1,119.5 million, an increase of $174.7 million from the prior year. This increase was attributable to changes in the following components of current assets from continuing operations and current liabilities from continuing operations:

(in thousands) | September 30, 2023 |  | September 30, 2022 |  | Variance
Current Assets from Continuing Operations: |  |  |  |  |
Cash and cash equivalents | $ | 418,055 |  |  | $ | 140,771 |  |  | $ | 277,284 |
Accounts receivable, net | 816,686 |  |  | 990,531 |  |  | (173,845) |
Inventories | 985,292 |  |  | 1,556,426 |  |  | (571,134) |
Commodity derivative assets – current | 239,595 |  |  | 502,097 |  |  | (262,502) |
Other current assets | 67,471 |  |  | 75,402 |  |  | (7,931) |
Total current assets from continuing operations | $ | 2,527,099 |  |  | $ | 3,265,227 |  |  | $ | (738,128) |
Current Liabilities from Continuing Operations: |  |  |  |  |
Short-term debt | 14,138 |  |  | 652,947 |  |  | (638,809) |
Trade and other payables | 822,153 |  |  | 930,027 |  |  | (107,874) |
Customer prepayments and deferred revenue | 211,867 |  |  | 258,828 |  |  | (46,961) |
Commodity derivative liabilities – current | 142,511 |  |  | 137,168 |  |  | 5,343 |
Current maturities of long-term debt | 27,535 |  |  | 112,029 |  |  | (84,494) |
Accrued expenses and other current liabilities | 189,430 |  |  | 229,508 |  |  | (40,078) |
Total current liabilities from continuing operations | $ | 1,407,634 |  |  | $ | 2,320,507 |  |  | $ | (912,873) |
Working Capital from Continuing Operations | $ | 1,119,465 |  |  | $ | 944,720 |  |  | $ | 174,745 |

Current assets from continuing operations as of September 30, 2023 decreased $738.1 million in comparison to those as of September 30, 2022. This decrease was primarily related to the reduction of inventories and current commodity derivative assets which was partially offset by a sharp increase in cash. The decreases in inventories and derivatives can largely be attributed to the stabilization of agricultural commodity prices in the current year in comparison to the significant increases in the prices of agricultural commodities, including fertilizer, in the same period of the prior year. The decreases in inventory and derivatives also had a direct impact on cash as the Company was not deploying the cash to hold working capital as it had done in the previous year.
Current liabilities from continuing operations decreased $912.9 million from the prior year mainly due to the decreased utilization of the Company's short-term revolving credit line. The decreased use of the short-term revolving credit line is a result of the stabilization of commodity prices in the year compared to the severe increase in commodity prices in the same period of the prior year, as well as a strategic focus on managing the use of short-term debt to fund working capital in light of the rising interest rate environment.
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Sources and Uses of Cash

|  | Nine months ended September 30,
(in thousands) |  | 2023 |  | 2022
Net cash provided by (used in) operating activities |  | $ | 696,087 |  |  | $ | (153,370) |
Net cash (used in) provided by investing activities |  | (117,263) |  |  | 2,919 |
Net cash (used in) provided by financing activities |  | (275,846) |  |  | 75,489 |

Operating Activities
Operating activities provided cash of $696.1 million and used cash of $153.4 million in the first nine months of 2023 and 2022, respectively. The increase in cash provided was primarily due to the decreased working capital needs driven by significant decreases in agricultural commodity prices and bushels on hand when compared to the same period in the prior year. When removing the significant changes in operating assets and liabilities and $12.1 million of unrealized currency losses in Egypt, cash from operations was consistent with the same period of the prior year.
Investing Activities
Investing activities used cash of $117.3 million through the first nine months of 2023 compared to providing cash of $2.9 million in the prior period. The increase in spending from the prior year was due to increased purchases of property, plant and equipment of approximately $36.5 million from increased investments across all segments in addition to $24.3 million cash used in a business acquisition. The prior year also included approximately $62.7 million of additional net proceeds from the Company's exit of the Rail business.
We expect to invest approximately $125 million to $150 million in property, plant and equipment in 2023, with spending split evenly between growth projects and maintenance.
Financing Activities
Financing activities used cash of $275.8 million and provided cash of $75.5 million for the nine months ended September 30, 2023 and 2022, respectively. This increase in cash used from the prior year was due to repayments made in the current year driven by the significant increase in agricultural commodity prices in the prior period and the related need for short-term borrowings. As agricultural commodity prices have decreased in the current year and the Company is operating in a more stable pricing environment, more repayments and less borrowings occurred on the Company's short-term credit facilities.
The Company paid $18.8 million in dividends in the first nine months of 2023 compared to $18.3 million paid in the prior period. The Company paid dividends of $0.185 and $0.18 per common share in January, April, and July of 2023 and 2022, respectively. On August 17, 2023, the Company declared a cash dividend of $0.185 per common share payable on October 20, 2023, to shareholders of record on October 2, 2023.
The Company is party to borrowing arrangements with a syndicate of banks that provide a total of $1,858.5 million in borrowing capacity. As of September 30, 2023, the Company had $1,841.4 million available for borrowing.
Certain of our long-term borrowings include covenants that, among other things, impose minimum levels of working capital and various debt leverage ratios. The Company is in compliance with all covenants as of September 30, 2023. In addition, certain of our long-term borrowings are collateralized by first mortgages on various facilities.
Because the Company is a significant borrower of short-term debt in peak seasons and the majority of this is variable rate debt, increases in interest rates could have a significant impact on our profitability. In addition, periods of high grain prices and/or unfavorable market conditions could require us to make additional margin deposits on our exchange traded futures contracts. Conversely, in periods of declining prices, the Company could receive a return of cash.
Management believes the Company's sources of liquidity will be adequate to fund operations, capital expenditures and service indebtedness.
At September 30, 2023, the Company had standby letters of credit outstanding of $3.3 million.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
For further information, refer to our Annual Report on Form 10-K for the year ended December 31, 2022. There were no material changes in market risk, specifically commodity and interest rate risk during the nine months ended September 30, 2023.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of September 30, 2023, to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the third quarter of 2023, identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Andersons, Inc. | Q3 2023 Form 10-Q | 35

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Part II. Other Information
Item 1. Legal Proceedings
The Company is subject to legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. Refer to Part I, Item 1 of this Form 10-Q in the Notes to Condensed Consolidated Financial Statements in Note 13, “Commitments and Contingencies,” In the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss, or a material loss greater than a recorded accrual, concerning loss contingencies for asserted legal and other claims.
The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected.
Item 1A. Risk Factors
The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in Part I, Item 1A of the 2022 Form 10-K under the heading “Risk Factors,” any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Periods |  | Total Number of Shares Purchased (a) |  | Average Price Paid Per Share |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |  | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (b)
July 2023 |  | 234 |  |  | $ | 46.15 |  |  | — |  |  | $ | 85,532,211 |
August 2023 |  | — |  |  | — |  |  | — |  |  | 85,532,211 |
September 2023 |  | — |  |  | — |  |  | — |  |  | 85,532,211 |
Total |  | 234 |  |  | $ | 46.15 |  |  | — |  |  | $ | 85,532,211 |

(a) During the three months ended September 30, 2023, the Company acquired shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.
(b) As of August 20, 2021, the Company was authorized to purchase up to $100 million of the Company’s common stock (the "Repurchase Plan") on or before August 20, 2024. As of September 30, 2023, $14.5 million of the $100 million available to repurchase shares had been utilized. The Repurchase Plan does not obligate the Company to acquire any specific number of shares. Under the Repurchase Plan, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.
Item 5. Other Information
During the three months ended September 30, 2023, none of the Company’s directors or executive officers adopted, modified, or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
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Item 6. Exhibits

Exhibit Number |  | Description
31.1* |  | Certification of the Chief Executive Officer under Rule 13(a)-14(a)/15d-14(a)
31.2* |  | Certification of the Chief Financial Officer under Rule 13(a)-14(a)/15d-14(a)
32.1** |  | Certifications Pursuant to 18 U.S.C. Section 1350
101** |  | Inline XBRL Document Set for the Condensed Consolidated Financial Statements and accompanying notes in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q.
104** |  | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.
* Filed herewith
** Furnished herewith

Items 3 and 4 are not applicable and have been omitted.
The Andersons, Inc. | Q3 2023 Form 10-Q | 37

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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  | THE ANDERSONS, INC.
Date: November 8, 2023 |  | /s/ Patrick E. Bowe
|  | Patrick E. Bowe
|  | President and Chief Executive Officer
Date: November 8, 2023 |  | /s/ Brian A. Valentine
|  | Brian A. Valentine
|  | Executive Vice President and Chief Financial Officer

The Andersons, Inc. | Q3 2023 Form 10-Q | 38